Still, fact is that even though it was mostly the money that got people’s adrenaline pumping, it is the technology that got the ball rolling in the first place. And this technology, blockchain, might still hold huge potential. This could be the time for business developers, entrepreneurs and curious individuals to jump on the blockchain train and to be inspired. But such inspiration will require a better understanding of how the technology works first. Unfortunately, most of the current explanations out there are either covered in complex technical jargon or are way too shallow and lack in-depth details, neither of them which leads to a clear understanding. So where to start? Allow me to suggest you to start here. This ten to fifteen minute read will explain what is considered so revolutionary about this technology. It will be well worth your time. Enjoy.

What on earth is Blockchain?

First of all; a blockchain is a digital concept to store data. This data comes in blocks, so imagine blocks of digital data. These blocks are chained together, and this makes their data immutable. When a block of data is chained to the other blocks, its data can never be changed again. It will be publicly available to anyone who wants to see it ever again, in exactly the way it was once added to the blockchain. That is quite revolutionary, because it allows us to keep track records of pretty much anything we can think of (to name some: property rights, identities, money balances, medical records), without being at risk of someone tampering with those records. If I buy a house right now and add a photo of the property rights to a blockchain, I will always and forever be able to prove that I owned those rights at that point. Nobody can change that piece of information once it is on a blockchain (well, there is one way, but this is advanced material so I suggest you read it later, you can find it here though). So — Blockchain is a way to save data and make it immutable. That sounds great, but the big question of course is: how does that work?

Step 1 — Transaction data

Alright, let’s start off with an example: the Bitcoin blockchain. The Bitcoin blockchain is the oldest blockchain in existence. The blocks on the Bitcoin blockchain consist of approximately 1 MB of data each. At the time of writing it counts about 525,000 blocks, meaning roughly a total of 525,000 MB has been stored on this blockchain. The data on the Bitcoin blockchain exclusively exists out of transaction data in regard to Bitcoin transactions. It is a giant track record of all the Bitcoin transactions that have ever occurred, all the way back to the very first Bitcoin transaction. In this article we will assume that a blockchain stores transaction data, just like the Bitcoin blockchain.

Step 2 — Chaining the blocks (with a hash)

Imagine a bunch of blocks of transaction data (image 1).

Three blocks, all containing some transaction data. Not quite special yet. You can compare it to some stand-alone word documents that simply describe what transactions have occurred and how these have impacted certain balances. Document 1 would then chronologically describe the first transactions that have occurred up to 1 MB, whereafter the next transactions would be described in document 2 up to another MB, and so on. These documents are the blocks of data. These blocks are now being linked (aka chained) together. To do this, every block gets a unique (digital) signature that corresponds to exactly the string of data in that block. If anything inside a block changes, even just a single digit change, the block will get a new signature. How this works? This happens through hashing and will be thoroughly explained later in step 3.

Let’s say block 1 registers two transactions, transaction 1 and transaction 2. Imagine that these transactions make up a total of 1 MB (in reality this would be much more transactions). This block of data now gets a signature for this specific string of data. Let’s say the signature is ‘X32’. Here is what this looks like:

Remember, a single digit change to the data in block 1 would now cause it to get a completely different signature! The data in block 1 is now linked to block 2 by adding the signature of block 1 to the data of block 2. The signature of block 2 is now partially based on the signature of block 1, because it is included in the string of data in block 2. Here is what this looks like:

The signatures link the blocks to each other, making them a chain of blocks. Let’s picture adding another block to this chain of blocks; block 3. Here is what this looks like: