What is a blockchain? This article explains the basic functionalities of the technology and its main advantages.

“A blockchain is a distributed, decentralized, public ledger.”

Got it?

Probably not; unless you are already familiar with the technology or have an advanced technological understanding.

For the low-techs out there (and I may humbly include myself), let’s break it down and explain what blockchain means and why it is useful.

“Blocks” and “Chains”

Blockchain means that digital information (the “block”) is stored in a public database (the “chain”).

A block can contain all kind of information, for example the date, time and amount of a transaction, a name, medical information, supplier details, nearly anything can be stored in a block. It’s almost like grandma’s garage.

A “blockchain” are multiple blocks strung together. When a new block is added to the chain, the following will happen:

  1. The information in the block must be verified by the network. The blockchain network consist of thousands of computers (“nodes”). All of these nodes must verify the block. That happens according to a pre-defined consensus principle.


  1. Once verified by the network, the block will be given a “hash” – a unique code that identifies the block. Each block must be distinguishable from other blocks, just like you and I are distinguishable by our names and appearance. The uniqueness of a block is expressed in the hash.


  1. After a new block has been added to the chain, each node on the network will receive an updated version of the blockchain. There is no single “master version,” each node has an identical copy. That also means each node can view the public information stored on the blockchain.

It’s like a digital book …

I like to use the following non-tech analogy:

A blockchain is like a book. Whenever you want to store new information, you take a piece of paper and write the information on it. Then you send it to all your friends. Once they confirm the information is correct, they will sign on the paper. This paper will then be included in the official version of the book as a new page. Finally, everyone in the network will receive a copy of the revised book.

Why is blockchain such a big deal?

Blockchain is fundamentally different from the way how we currently manage and store information. If information is sent via the internet, all the data is being managed by the server provider.

In a blockchain, there is no such server and no central authority. That’s why we speak of “decentralization”. Blockchain is a sort of techno-anarchic structure in which a network governs itself.

If you use Facebook, you don’t know what information they store and what the company does with it. You have to trust the company’s data policies. The same holds true with your email provider. On a blockchain, however, you have full control over your data.

Hence, the expression “trustless information”. We don’t need to trust a central authority that the information is correct, as the network has verified it.

Furthermore, information is distributed via the network and it is public. Thus, there is greater transparency and it is more difficult to manipulate data.

Blockchains also come with greater security. If a hacker attempts to change the information in a block, the hash would change. As blocks are stored in linear and chronological order, the block would move to the top of the chain and the network would recognize the attack. Thus, editing or deleting information on a blockchain is nearly impossible.

The various advantages of blockchain technology allow for a wide range of use cases. Blockchain can bring greater security to monetary transactions, increase transparency in business and government processes, and reshape the way we send, manage and store data.

However, the real big deal about blockchain is its ability to create a peer-to-peer network that is not relying on any middlemen. Banks, real estate agents, even government institutions could thus be cut out of the picture. That’s the revolutionary potential of the technology, and it’s also the biggest threat to the current economic and political system.

You like to learn more about Blockchain? Liechtenstein University Launches Blockchain Research Program

Image: ©Shutterstock