What is a blockchain?

The blockchain is “a shared, immutable digital ledger, enabling the recording of transactions and the tracking of assets within a business network and proving a single source of truth,” according to IBM.  

Sounds like gibberish, right? Let’s break down what Blockchain means in understandable terms. 

Imagine a Google Doc that thousands of people around the world had access to all at the same time. Replace an edit on the document with a transaction – someone sends money, signs a contract, ships something – and that transactions get marked on the doc the moment it happens for all to see. But the doc has unusual rules:  

1. You can only ever add new lines at the bottom, and you can never erase or change what is already there.   

1. Before any line gets written, everyone on the network has to agree that it is legitimate – you actually have the money you claim to be sending, and that the request really came from you by signing each line in a way that cannot be forged 

1. There is no owner, as every person on the network holds the exact same copy which gets constantly checked by each other.  If someone alters their own copy, it will not match everyone else’s and get thrown out automatically. 

Although the idea seems relatively simple, the impact it has had is anything but.   

Before blockchain technology existed, each transaction between two people needed a middleman; whether that was a bank, a company, or the government. There needed to be an oversight to make sure both parties traded fairly.  

That has been the default for as long as anyone can remember, but now, two people or entities anywhere in the world can send contracts, money or exchange assets directly with each other and trust the record without needing intervention.   

What is a ‘block’ in blockchain 

Now that we understand what a blockchain is, let’s talk about the specific part of the word, ‘block.’ Every blockchain is made up of individual blocks (imagine them as real physical blocks), and each block has three components to it: the data, the hash, and the previous blocks hash.   

The data is what it sounds like and is the simplest part. There is data stored inside that has necessary information about whatever needs to be recorded.  Think about the last time you used Venmo to send someone money, bought something using Apple Pay, or signed a document online — all of that activity leaves a record. 

Now there is the question of how to differentiate each block and tell them apart.   

Hashes are what defines these blocks, every single block has its own hash with its own unique combination, looking something like, “a3f8c2d9…” Similar to a fingerprint, no two are the same. It is tied directly to whatever is inside that block.   

Now what happens if someone tampers with these files?  If they do, the block “fingerprint” completely changes, and it’s not something that can be faked or worked around. The hash is not “assigned” to a block as it is generated mathematically, directly from the data inside of it. Change one singular character or even space, the algorithm generates a completely new mathematical combination that is completely different and unrecognizable from before.