Blockchain For Dummies: A Basic Guide

Jump to page contents

Blockchain For Dummies: A Basic Guide

Blockchain is the underlying technology upon which digital tools are built. The most popular amongst these tools are cryptocurrencies. In fact, blockchain was developed as a way to support the first cryptocurrency, Bitcoin. Beyond just supporting digital transactions, however, blockchain is poised to revolutionise the world, by facilitating everything from smart contracts to national elections.

Lesson 1: Blockchain Simplified

At its very basic, a blockchain is a series of blocks, linked together with a chain. Each block contains packets of data which are linked to other blocks through the chain which holds them together. In practical terms, an entire Bitcoin blockchain would hold the records of transactions between different users and cryptocurrency exchanges. Each block on the chain would hold all the transactions which took place within a pre-defined period.

Lesson 2: Blockchain Location

In order to keep things simple, this guide will not delve into private blockchains, focusing instead on the more common public blockchains. Blockchain technology was designed to be decentralised, which means that it is not stored or controlled by any central authority.

Blockchain For Beginners
This is how a simple blockchain network would look

As a result, literal copies of the same blockchain is stored on thousands of computers across the world. These computers continually update the blockchain with new data packets and blocks.

Lesson 3: Validating Blocks

While mining blocks adds them to an existing blockchain, they must first be validated to ensure that they are free from errors or unauthorised changes. This validation is carried out by nodes, which are also computers hosting a blockchain but are not rewarded for their work. In the Bitcoin’s blockchain, for example, miners choose the transactions for a new block, whilst nodes verify them. Once verification is complete, the nodes distribute the new blocks to all other nodes.

Lesson 4: Different Blockchains

The low barriers to entry and decentralised nature of the open-source software allow different blockchains to be created by practically anyone. Just like the high number of cryptocurrency exchanges around, there is a massive number of blockchains, with the latest estimate close to 10,000.

The most popular blockchain platforms are:

  1. Ethereum
  2. Omni
  3. NEO
  4. Tron
  5. EOS

These blockchains are typically used to serve as the base of newly form blockchains. Ethereum is probably the most famous blockchain, as it holds the ideal infrastructure to facilitate smart contracts.

The Ethereum blockchain logo

Definition: A smart contract is an electronic contract which is automatically executed online without the need of a middleman

Lesson 5: Benefits of Blockchain

The main benefit of this technology is that it provides a solution for recording and transferring data in a transparent way. As a result, all transactions are publically visible and can be proven, creating trust amongst users and removing the need for trusted intermediaries, such as notaries or escrow services. Apart from revolutionising traditional sectors, however, this technology could change the way tech companies operate, since Visa, Airbnb, and Uber are also intermediaries in their respective sectors.

Lesson 6: Blockchain Rules

Every blockchain has a set of rules known as the protocol. This consensus algorithm is normally defined by the blockchain’s creators and is followed by each computer within the system. The protocol can rule on virtually anything, with the Bitcoin protocol, for example, setting the creation of a new block every 10 minutes and the reward to miners reducing ever 210,000 blocks. 

Ready to join our tribe?

We respect your email privacy

Subscribe now to recieve exclusive updates and offers!

Recently Similar Guides

Latest Guides

Cryptocurrency

Best Crypto Credit Cards List

What Are Crypto Credit Cards? Cryptocurrency has taken the world by storm and it has revolutionalized the financial sector and further laid an argument for cryptocurrency as the future global currency. There are now several things you can do with cryptocurrencies. You can trade, invest and exchange for goods and services. Another innovation that cryptocurrency […]

24 September, 2021
Altcoins,Litecoin

All you need to know about Litecoin ATMs

Litecoin has the reputation for being the second cryptocurrency that was created after Bitcoin, so it makes sense that Litecoin ATMs are on the rise. It can be used as a medium for payment anywhere around the world without any interference from a third party. Litecoin has $11 billion and a maximum supply of 84 […]

1 September, 2021
eToro

Comprehensive Guide For eToro UK Users

eToro is a fintech start-up and is considered among the first pioneers of social trading. It was founded in 2007 in Tel Aviv, Israel. It is headquartered in Greater London, United Kingdom, with offices in Limassol, Cyprus, Sydney, and New Jersey in the US. The fact that it’s headquartered in London makes it appealing to […]

26 August, 2021
Crypto Mining,Cryptocurrency

Make your Own Cryptocurrency

Cryptocurrency is a decentralized digital currency that is not issued by a central financial authority. Cryptocurrencies are also used as a form of exchange for products, services, and also fiat currencies. The majority of these cryptocurrencies are created by tech and financial companies to serve specific purposes. For example, the Ethereum technology is used for […]

19 August, 2021
Bitcoin,token

Crypto Coin Vs Token — Which One To Choose In 2021?

There are so many things to learn about cryptocurrency, the learning never stops. When it comes to Crypto coin Vs Token, there are a few things you need to know to be able to differentiate between these two digital assets. Some of the things you need to know about these crypto-assets include their definitions, functionalities, […]

11 August, 2021
Analysis

Is Reddcoin a good investment in 2021?

Reddcoin is a decentralized cryptocurrency that serves as a digital peer-to-peer medium of exchange with no central authority issuing or regulating it. It was launched in 2014, a year most consider as the peak of cryptocurrency creation and blockchain technology. There is a total supply of 28 billion with a circulating supply of the same […]

3 August, 2021
Analysis,Litecoin,Technology

Is Litecoin a good investment right now?

Litecoin is popularly known as the second cryptocurrency to be created, as it came to life in 2011 by a former Google employee, Charlie Lee. It is an open-source software that aids peer-to-peer cryptocurrency transactions. It is quite similar to Bitcoin and most times referred to as an altcoin or spinoff of Bitcoin. We cover […]

21 July, 2021
Altcoins,Analysis

5 Top Altcoins That Will Explode in 2021

Cryptocurrency is a concept known to virtually every human on the face of the earth. From the launch of the first cryptocurrency, Bitcoin, it has gradually become an acceptable financial concept that has the potential to take over from the traditional fiat currency. Apart from Bitcoin, which is widely known as the most popular and […]

14 July, 2021