Blockchain for Beginners: What is Blockchain Technology?

The word “blockchain” can seem about as straightforward as “the cloud.” However, at its core, it’s pretty simple. Blockchain, which you have heard of in connection to cryptocurrency, is essentially just a breed of database.

Blockchain’s name explains how it works in a nutshell: Data is stored in blocks, which are then chained together permanently. So far, blockchain technology has primarily been implemented for use as transaction ledgers, but it also has other potential applications.

Some are hailing blockchain as a central part of a transition to Web 3.0, the decentralized next generation of the Internet.


  • Blockchain is a type of database in which pieces of data are stored together in sequential blocks that cannot be altered or deleted.
  • The most popular cryptocurrency, Bitcoin, is stored on the blockchain.
  • Bitcoin’s blockchain is decentralized, meaning all users have collective control and no individual or single entity controls the data.
  • Blockchain technology has potential uses in different areas like banking, elections, healthcare, and supply chains.
  • Several major companies have adopted blockchain for data storage, including Walmart, Pfizer, and IBM.

Where and how blockchain is stored

Blockchain is interesting in that it’s not stored on any single computer system or server. That’s part of its appeal—it is decentralized and thus has no central storage location. Instead, the blockchain is stored on multiple computers and systems across the network.

Nodes are a key aspect of blockchain to know about. Blockchain is a digital ledger of transactions that are copied to a series of devices within a network, and the devices containing that complete record of all transactions are called nodes.

Every node in a blockchain verifies the validity of a new batch of network transactions. Each node has a unique identifier so it’s distinguishable from other nodes in the same network.

Types of nodes:

  • Mining nodes: These have the power to add transactions to a blockchain
  • Full nodes: Complete record storage of all transactions
  • Lightweight or minimal nodes: Minimal record storage
  • Supernodes: These connect full nodes to each other

Types of blockchains to understand

Blockchains typically fall under a handful of categories: public, private, permissioned, consortium, and hybrid.

Public blockchain

Public blockchain is where Bitcoin started out. Instead of being centralized, which can lead to lowered security and transparency on the network, the public blockchain is decentralized. Using distributed ledger technology (DLT), public blockchain stores every piece of data on a peer-to-peer network.

Public blockchain appeals to many because it is fully decentralized and allows access to anyone who wishes to be involved in the blockchain’s activities.

Private blockchain

A private blockchain is controlled by a single entity or works on a closed network or another restricted network with specific guidelines. This might be a useful option for an individual private business that wishes to control who is granted access.

Private blockchains are much more restrictive. They’re also not decentralized since a person or organization retains control of who can run a blockchain node, who can join the network, and who can initiate transactions.

Permissioned blockchain

In the case of a permissioned blockchain, anyone is allowed to join a network, but each person is only permitted to perform certain activities on that network. These networks contain a layer of access control that is built into the blockchain nodes.

Consortium blockchain

A type of permissioned blockchain is called a consortium blockchain. Multiple organizations have a stake in a consortium blockchain, making it a semi-private blockchain. It works much like a private blockchain. But since more than one organization has control, it offers some of the same benefits as a fully decentralized network.

Hybrid blockchain

As with anything that is a hybrid, a hybrid blockchain offers some of the top attributes of both private and public blockchains. A hybrid blockchain can implement a public blockchain that maintains a restricted segment. Users of a hybrid blockchain receive full access but their identifying details remain private unless they complete a transaction on the blockchain.

Related: See more blockchain stocks on our themes page

How secure is information on a blockchain?

Let’s dive into how data is secured in blockchain technology.

The very nature of blockchain adds a level of security. Since every transaction is added to a particular block—and once a block is completed it is added to the chain in order—it’s very difficult to delete or alter transactions. Every transaction on the blockchain also has a specific timestamp.

One of the most common questions people have about this technology is whether blockchain can be hacked.

While instances of cryptocurrency exchanges being hacked are all too common, a successful attack on the blockchain itself is extremely rare.

Proof-of-Work (PoW) and Proof-of-Stake (PoS) consensus mechanisms help protect blockchain networks from hackers. The way that Bitcoin’s PoW blockchain works is that at least 51% of the nodes must agree with any given transaction for it to be approved. This makes it quite difficult for the blockchain to be hacked.

Other networks currently using PoW are Ethereum, Bitcoin Cash, Litecoin, and Monero. (Ethereum is moving toward PoS, which is more energy-efficient and scalable.)

For long-lasting, established networks like Bitcoin and Ethereum, the probability of a successful hack is extremely low. The larger the blockchain becomes, the more nodes the bad actors would need to compromise in order to hack the network. This means a blockchain becomes stronger over time as more users and nodes are added.

How could blockchain be used in the future?

The range of potential uses for blockchain technology is fairly broad. Any industry that could benefit from greater security and accuracy of data ledgers could likely shift to a blockchain model.

Some areas experts have considered as prime candidates for blockchain tech include banking, currency, healthcare, supply chains, contracts, and property records.

Will blockchain replace banks entirely? In theory, it could. However, it’s more likely that banks will be forced to adopt blockchain in some manner in order to keep up.

In banking, blockchain solves several problems. Blockchain transactions tend to be accomplished much more quickly than those on a bank server—blockchain may only take 15 minutes to an hour, while banking often requires a 24–72 hour delay for certain transactions.

Blockchain for your banking needs could also solve the issue of accessibility. The blockchain is always available (versus traditional business hours for many banks), and a user can gain access to the blockchain with only a mobile phone and internet connectivity.

Other potential uses:

  • Food industry: Blockchain can track food product routes to ensure greater food safety (IBM Food Trust is already implementing this)
  • Currency: To help provide security to currency rates and offer means of payment to the unbanked
  • Healthcare: To secure medical record data
  • Property records: To eliminate the need for physical documents to prove ownership

Bottom line

If anything, blockchain technology is an omni-industry disruptor. It’s making its way into more industries and applications all the time, and cryptocurrency is just the tip of the iceberg. While different types of blockchains offer their own benefits and drawbacks, it’s clear that blockchain is a secure database at heart.

Rachel Curry is Pennsylvania-based content writer and journalist talking all things finance. She likes to give meaning to numbers by humanizing them. You can connect with her on Twitter at @writingsofrach.

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