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Understanding Blockchain in 500 words or less

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Gain an elementary understanding of Blockchain technology.

An Introduction to Blockchain

You’ve heard of A.I., right? Well even though it’s got all the limelight at the moment, as far as current transactional systems go, blockchain (you may have heard of it) may have greater impact than A.I (and it's out there right now). The following describes blockchain, how it's being used, and why it's being embraced by some and forced on others.

What a Blockchain is:

1. It’s a single electronic ledger (public or open-source) which is tightly synchronized between multiple servers, each of which must simultaneously agree to any addition or change (aka "blocks") to that ledger. Note, blockchains don't have to just track financial transactions. For example, a global-plutonium-usage blockchain is a perfectly legitimate use.

2. Every entry going into the ledger must be signed by an encryption algorithm. For a new entry, blockchain mashes together all the crypto-signatures that have gone before it, resulting in the next signature. This is a required part of each entry and the key to understanding blockchain. You see, this essential action verifies the integrity of the whole “chain” (all entries). And this is done by all the servers on each and every transaction.

Blockchain claims to:

1. Improve security:

            a. It's a lot harder to hack data when it's not only encrypted but you have to fake-out 200 (or 2,000) servers around the globe while uniquely altering each and every entry that's ever been entered on the chain of each of those servers (and do it all at the same time). Even if this is pulled off, a simple backup can expose the corruption because many of the signatures won’t match.

2. Improve trust:

            b. The whole point of blockchain is that data-integrity is baked into the technology. The result is that imperfect institutions don’t have to be relied upon to police themselves and others (wherever “cooking the books” is a worry).

3. Offer transparency:

            a. This isn't a must, but is built into the pure blockchain model.

4. Reduce middlemen and middle-processes (along with overhead and fees).

            a. Currency can be "bankless" because of the reasons stated above.

            b. Registering your car without a DMV.

            c. Buying stocks without a broker.

Who is using blockchain today?:

To name just a few:

1. Estonia runs elections, tax collection, the recording of parcels, and real-estate purchases through blockchains today.

2. Delaware - They are moving all corporate registration to blockchain (they started the process in 2016).

3. The Ukraine does government auctions using blockchain (the citizens were none too pleased with how government assets were showing up in the hands of their politicians' friends). The Minister of Finance has since said he wants all state transactions to be done on a blockchain.

4. A company in London ensures ethically-gotten diamonds are distinguishable from "blood diamonds" by inscribing them with a blockchain ID.


Like it or not, wherever we find corrupt governments, shady "charities," or lack of adherence to transactional rules, stakeholders and communities will increasingly demand blockchain solutions.

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by:David L. Hansen
Feel free to share this quick-read with others on your social media (many people are interested in learning but are just short on time).

Expert Comment

One of my friend having the following query

How is it different from a centralized server handling all transactions with encryption. Why the fuss in real world usage. Can you shed some light cos i never got the idea.
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by:David L. Hansen

There are several differences between a centralized server (using encryption) and the blockchain process. Here are the two biggest differences though:

First: Multiple distributed servers. When there are many servers around the world who all have to agree to the transaction you're attempting to make, the difficulty in faking a bad record (or changing a good one) becomes far more difficult because you need to attack all the servers at the same time.

Second: Chained records. Even if you get lucky with the first step (attacking all servers) and make it into the records of all servers at the same time by using some amazing hacking tools, now you have to alter every record in the stack. You see, you can't just change one and be done. You have to alter each of the records because their signatures are derived from ALL the previous ones. It's like replacing a child in a family with some random person. It won't work because they need to look like their parents (and the parents need to look like the grandparents). The child is derived from the parents' DNA (or signature) and gets a new DNA which is easily distinguished as being in the family (or not, if it's being faked).

An interesting side-effect arises from those two features...Let's assume you pull off both of these really tough challenges. You are still not out of the woods. Let's keep with the analogy and say this particular blockchain is an Asian family. You successfully change the child and the entire family, including grandparents, to Latino. All is well, you're in the clear right? Not so fast, someone you've never met presents a portrait of the family which they took sometime ago (a backup of the blockchain - even an old one) and they say, "Wait, this family is supposed to be Asian. "Something is wrong here. "The family's been hacked!"

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