What is a Blockchain?

A blockchain refers to a distributed database that is shared among computer network nodes. It is like a database, stores information digitally in an electronic medium. Blockchains are known best for their critical role in cryptocurrency systems like Bitcoin, where they keep a secure and decentralized record of transactions. The blockchain’s innovation is that it ensures the loyalty and security of a data record and generates trust without the requirement for a third party who is trusted.

The data structure differs significantly between a traditional database and a blockchain. The blockchain collects information in groups known as blocks, which hold sets of data. When a block’s storage capacity is reached, it is closed and linked to the previously filled block, forming a data chain known as the blockchain. All new knowledge that follows that recently introduced block is compiled into a recently created block, which is then added to the chain once it is complete.

A database generally arranges its information into tables, even though a blockchain, as the name suggests, organizes its data into rows and tables that are linked together. When implemented decentralized, this data structure creates an irreversible data timeline. When a block is completed, it becomes permanent and forms a part of this timeline. When a block is added to the chain, it is given an exact timestamp.


  • The blockchain is a form of shared database that differs from a traditional database in the way data is stored; it store data in blocks which are then linked together using cryptography.
  • As new data arrives, it is added to a new block. Once the block has been filled with data, it is linked to the previous block, putting the data in chronological order.
  • It can store various types of data, but its most common application to date has been as a transaction ledger.
  • In the case of Bitcoin, blockchain is used decentralized, so that no single individual or group has authority, and all users retain control collectively.
  • Because decentralized blockchains are immutable, the data entered is permanent. This means that Bitcoin transactions are permanently documented and viewable by anyone.

How does blockchain work?​

The purpose of blockchain is to enable the recording and transmission of digital information while preventing its editing. In this sense, it serves as the foundation for permanent ledgers, or records of activities that cannot be edited, erased, or destroyed. As a result, blockchains are often referred to as Distributed Ledger Technologies (DLT).

The blockchain concept was first presented as a research project in 1991 and before its first major use, Bitcoin, in 2009. Since then, the use of blockchains has increased dramatically due to the development of multiple cryptocurrencies, decentralized finance (Defi) apps, Non-fungible tokens (NFTs), and smart contracts.

Blockchain Decentralization​

Assume a corporation maintains a data center with 10,000 computers that are utilized to manage a database containing all of its clients’ account information. This corporation owns a warehouse facility that houses all of these computers under one roof and has complete control over each of these systems and all of the information housed within them.  This, however, creates a single point of failure. What if the power goes out at that location? What happens if its Internet connection has been lost? What if it catches fire? What if a bad actor deletes everything using a single keystroke? In any instance, the data has been lost or distorted.

The blockchain allows the data in that database to be distributed across multiple network nodes in different places. This not only adds redundancy but also ensures the accuracy of the data stored—if someone tries to change a record in one instance of a database, some other nodes are not affected, preventing a bad actor from doing so.  If a single user tampers with Bitcoin’s transaction record, the other nodes will cross-reference each other and readily identify the node with inaccurate information. This system aids in the establishment of an exact and visible sequence of occurrences. In this manner, no single node in the network may change the information stored within it.

As a result, data and experience (such as cryptocurrency) are irreversible. Such a database could be a record of transactions (as with cryptocurrencies), but the blockchain could also include a range of other information such as legal contacts, state identifiers, or a company’s product inventory.


Due to the decentralized structure of Bitcoin’s blockchain, all transactions can be transparently watched by either owning a personal node or using blockchain explorers, which allow anybody to see transactions taking place in real-time. Each node keeps a copy of the chain, which is updated as new blocks are confirmed and added. This means that you could trace Bitcoin anywhere it travels if you wanted to.

For example, in the past, exchanges were hacked, and those who stored Bitcoin on the exchange lost everything. While the hacker may be completely anonymous, the Bitcoins they stole are immediately traceable. It would be discovered if the Bitcoins stolen in some of these breaches were relocated or spent somewhere.

Who invented Blockchain?

Stuart Haber and W. Scott Stornetta, two scientists who aimed to implement a system in which document timestamps could not be manipulated, proposed blockchain technology in 1991.

Cypherpunk Nick Szabo suggested using the blockchain to protect a digital payment system known as bit gold in the late 1990s (which was never implemented).