Beginner's Introduction To Blockchain

Beginner's Introduction To Blockchain

How Does Blockchain Work? | Is It The Future?

Hi friend👋, welcome here! Today, I will try to explain as much as I can to you the concept of blockchain technology and how it works in lay-mans terms.

I did not want to call this article "Blockchain For Dummies" because I believe there is no dummy out there and we live in an information age where you can get to learn anything you want for free provided you invest in efforts, time and willingness to learn.


If you are from a financial background, you probably know ledgers and basically, blockchain is that with a few extra nitty-gritty!

Blockchain is revolutionary and complicated, hence seems tough to grasp. However, you should not be afraid of learning its fundamentals.

Probably you might have heard of "Bitcoin". Bitcoin is a cryptocurrency that uses blockchain as its underlying technology.

So What Is Blockchain?

As the name sounds or suggests, It is basically a chain of blocks linked together to store information like how financial ledgers work.

image.png It is a chain of immutable blocks that are cryptographically secured.

Blockchains are secure databases by design. The concept was introduced in 2008 by Satoshi Nakamoto, and then implemented for the first time in 2009 as part of the digital bitcoin currency;

image.png The security is built into a blockchain system through the distributed timestamping server and peer-to-peer network, and the result is a database that is managed autonomously in a decentralized way.

This makes blockchains excellent for recording events — like medical records — transactions, identity management, and proving provenance. It is, essentially, offering the potential of mass disintermediation of trade and transaction processing.

Major Terms & How Blockchain works?

Before we get the dice rolling, let’s learn some elements & terms of a blockchain network.



The users of a blockchain network are called nodes. The nodes collectively moderate and host the network. This is how blockchain functions in a decentralized manner.


🔹 Wallets

How do we know where our cryptocurrency goes after we make a transaction? It goes to a wallet. A wallet can be considered an address on the blockchain.

image.png Each node on the network has a virtual wallet that is made to function with blockchain technology. We use wallets to store cryptocurrencies and keys.

🔹 Keys

Each wallet has two cryptographic keys: a public key and a private key. In the case of sending a transaction, both the public and private keys are included in the transaction data.

image.png Public keys are used to send an encrypted message to another public key — it’s like mailing a letter from one address to another. However, the message can only be decrypted by the corresponding private key.


A hash is a shortened version of data. It’s like creating a code name. We can input something very large in size and data like a movie, and create a shortened name for it. Hashes allow us to encode information, and keep it secure and concise. Hashing data plays a key part in the function of the blockchain.

image.png Every hash is unique. Therefore, we can be sure a block hasn’t been tampered with — if the data is changed, the hash will become invalid.

The blockchain does one thing: It replaces third-party trust with mathematical proof that something happened. — Adam Draper

Blockchain Architecture 🗼

A blockchain works by linking together pieces of information, or blocks, using code. It functions in a linear and chronological fashion so that recent blocks are added to the front of the chain.

image.png Each block contains data, the hash of the block, and the hash of the previous block, hence creating the chain. There are a couple of other pieces of information that are contained within a block.

Consensus Mechanisms 🛠📑✔

So how do we verify that potential blocks are real and trustworthy before we add them to the chain? Consensus mechanisms are designed to prioritize either decentralization or efficiency.

image.png The Byzantine General’s Problem Is a problem that describes the challenges in reaching consensus between multiple entities that do not trust each other.

Let's look at only two solutions or mechanisms used widely in solving the above problem.

Proof of Work 🛠:

It requires the people who own the computers in the network to solve a complex mathematical problem to be able to add a block to the chain. It requires lots of computing power.

The proof-of-work algorithm is used by Bitcoin and aims to add a new block every 10 minutes.

Proof Of Stake🛠:

The Proof of Stake (PoS) concept states that a person can mine or validate block transactions according to how many coins they hold.

For you to be able to understand these consensuses, you need to read more here or get involved in the crypto world.


Why is blockchain important❓

We are all now used to sharing information through a decentralized online platform: the internet. But when it comes to transferring value – e.g. money, ownership rights, intellectual property, etc. – we are usually forced to fall back on old-fashioned, centralized institutions or establishments like banks or government agencies.

image.png Even online payment methods which have sprung into existence since the birth of the internet – PayPal being the most obvious example – generally require integration with a bank account or credit card to be useful. Blockchain comes in to remove this middle man!

Blockchain technology offers the intriguing possibility of eliminating this “middleman”. It does this by filling three important roles – recording transactions, establishing identity and establishing contracts – traditionally carried out by the financial services sector.

image.png Originally, blockchain was just the computer science term for how to structure and share data. Today blockchains are hailed the “fifth evolution” of computing. Blockchains are a novel approach to the distributed database.

Major Concepts Of Blockchain Explained🌟:

Decentralized 🥨

Blockchain does not store any of its information in a central location. Instead, the blockchain is copied and spread across a network of computers.

image.png Whenever a new block is added to the blockchain, every computer on the network updates its blockchain to reflect the change.


Blockchains are immutable and unchangeable. Immutability, in the context of the blockchain, means that once something has been entered into the blockchain, it cannot be tampered with.

Distributed System💫

It is a type of distributed ledger technology (DLT), a digital system for recording transactions and related data in multiple places at the same time just like peer to peer network with each peer having a copy of the current ledger. This can go hand in hand with decentralisation.


Blockchains are continuously updated and kept current for everyone on the network. All information is time-stamped and recorded in chronological order. Once a new block is added to the network, all users will receive the updated blockchain.

Types Of Blockchain:

There are many different types of blockchains.

Public blockchains:

Public blockchains, such as Bitcoin, are large distributed networks that are run through a native token. They’re open for anyone to participate at any level and have open-source code that their community maintains.

Permissioned blockchains:

Permissioned blockchains, such as Ripple, control roles that individuals can play within the network. They’re still large and distributed systems that use a native token. Their core code may or may not be open source.

Private blockchains:

Private blockchains tend to be smaller and do not utilize a token. Their membership is closely controlled. These types of blockchains are favoured by consortiums that have trusted members and trade confidential information.

image.png All three types of blockchains use cryptography to allow each participant on any given network to manage the ledger in a secure way without the need for a central authority to enforce the rules.

The removal of central authority from database structure is one of the most important and powerful aspects of blockchains.

We do have other types lie consortium & hybrid which we have not looked at in this article!

Is It The Future?

My Short Answer is Yes, as we have already seen how it is helping to transition the web to web 3.0 and the metaverse community

Notes & Resources 📃

If you have failed to grasp everything I have written so far, kindly take this as a summary and if you are to forget, do not forget the concept. Blockchain is still at its tip if it was an iceberg and nascent technology with lots of features & a future.

Blockchain is data is stored in ”blocks” of information and then linked together in a permanent “chain.”

📌 An interesting free course on Udemy for Absolute beginners!
📌 Proof Of Stake - Investopedia
📌 Anneka Tracey On Medium
📌 Forbes Article


I know this was a long one but to recap on the functionality, nodes are the users on the network. Each user has their own wallet that keeps track of their cryptocurrencies and public and private keys.

Hashes correspond to data and are handy when you don’t want to reveal the true value of something, and when you want to make sure that it hasn’t been tampered with.

image.png Understanding Blockchain is an important piece in the puzzle to understanding how cryptocurrencies work under the hood. Get Involved today!

Hope you have learnt something out here and this term is no longer a techy lingo or an unknown tech buzzword roaming around.

I recently got a certificate from an online Blockchain course and I will be writing more about cryptocurrency, NFTs and how you can become a Blockchain Developer.

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Ronnie Atuhaire 🤓