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7 minute read

Understanding Blockchain for Beginners

Posted in Innovation   LAST UPDATED: MAY 23, 2018

Bitcoin has become one of the most searched term on Google nowadays. But what is Bitcoin? It's something that's based on Blockchain, but then what is Blockchain? And how people are making money out of it?

So, what is Blockchain?

I don't know why people fail to understand such an easy term "Blockchain". The name itself carries the definition – Block Chain. In general, it's just a chain of blocks that contains some information within. For example, consider your college contains a chain of departments, and each individual department block has some data about their students.


The data within the blocks cannot be updated once it is written. These blocks are connected with a link that cannot be broken. Logically, that link is a "Hash" or a set of characters that forms a unique hexadecimal number. Every new block in this chain contains the Hash of the previous block, which makes a locking and never breaking system.

Before digging deep it's important to understand De-centralised Systems.

De-centralised System

Ever wondered how Facebook/Google works? In simple terms, majority of the internet is based on Centralised Systems.

In centralised system all data/information is stored in one computer or say at one big data centre. Whenever we require that information, we fetch that data from that Data centre. Such data centres becomes a single point of failure in centralised systems.

Centralised Applications

Whereas in de-centralised systems data is replicated in the computers of every user in the network. Every computer contains its own copy of the data and it gets updated regularly. In de-centralised system, if any computer fails, data is still safe with other computers.

Decentralised App

Blockchain is a De-centralised system! Every computer in the blockchain network has all the blocks in its computer. And If someone tries tampers his version of blocks, the network will consider what majority say is correct.

Hence data inside blockchain cannot be forged or modified, this makes it a very good and secure platform to keep a track of money and perform transactions.

Current Story

Let's look at the present scenario how transactions/money control are performed. We all have a bank account and whenever we perform any transaction it goes to the Bank's server. Bank processes the transaction and takes some amount of money as Transaction Fees. In this case, it’s a centralised system. Bank holds all the information and performs all the processes.

But if we do transaction in Blockchain network then?

In Blockchain network, every computer holds the entire blocks (or rather holds the blockchain data) and these blocks contains data about the transactions. Which makes it possible to know the account balance of anyone within the blockchain. So, say if there are two people "John" and "Joe" within the blockchain network. John in trying to send Joe some money then Joe can cross check whether John holds that much Balance to perform that transaction or not. If the transaction is successful, Joe tells entire network to update John's and his balance.

The updated balance is written in the new block with the hash of previous block and gets added to the blockchain.

Huge Data?

Bitcoin/Ethereum both are public network and anyone can join. But downloading all the blocks will take a lot of hard disk space and then always syncing is also a big problem? So, cannot we join these network without a supercomputer?

Off course we can! Blockchain network has a concept of miners. Miners are people who perform validation of any transaction in blockchain and updates the blocks (actually ledger). Miners will validate our transactions as well but they'll charge a very small fee. Which makes it easy for anyone to join the blockchain network without having a computer!

This is where people can make easy money! Just lend your computer's processing power and work as miner in any blockchain network to generate rewards. There are huge Minnig farms in China, India and USA dedicated for mining Bitcoin, Ethereum, Tron and other cryptocurrencies.

Go ahead and join the Ethereum network here :

Just remember to keep your private key safe!