What is a Blockchain? (Uncensored Guide + Examples)

In this blog post, we are going to explain what a blockchain is in very basic terms. By the end of the post, you’ll be able to explain this life-changing technology to those you love saving them from the authoritarian dictatorships that never cease to control your every move.

Nevertheless, we don’t really discuss politics on this website, mostly just ideas.

Let’s get into it,

What is a Block?

In terms of Cryptocurrency, A block is just a bunch of data. In fact, the data could be almost anything, but usually, it’s just a collection of records for the numero uno crypto bitcoin. This data is literally just a list of transactions.

For example, it might look like this; x pays y fifty dollars, A pays B eighty dollars, and Y pays H fifteen dollars.

If we’re dealing with Ethereum, it’s usually just transactions, but it can be a few other things like things called smart contracts, which are really neat, but we’ll have time to explain them in another article.

For other altcoins, they could be the usage of your wifi,  files, or documents. Nonetheless, a block is just a collection of records.

For this example, to explain what a blockchain is, I will stick with a record of transactions like in bitcoin. Specifically, we call this record a ledger because it is a record of value exchanging hands.

You need to know that blocks do have limits, and they can only have so many transactions in them, so we have to keep adding more blocks.

For our example, bitcoin has an average of around 1,500 transactions in one block right now. This number changes, but you don’t really need to know why. Just know that these blocks do fill up, and then we have to do something with them.

Well, what do we do when these blocks are full? We add them to the network.

Now you might be asking how do we do that?

Well, mine them, and since bitcoin is a proof of work model, we have to prove that we mined them. 

This brings us to something called a hash. The next big question is;

What is a hashing function?

A hashing function is a system where you can put something into it, and it’ll output a hash. There’s a ton of math happening inside this magical box, but essentially you give it something, and it gives you something. 

In this case, bitcoin uses the SHA-256 hashing function. SHA stands for Secure Hashing Algorithm, and 256 refers to the number of zeros and ones that it has in whatever it puts out.

Whether you put in your name or the entire dictionary, it’ll always output 256 zeros and ones. Now, our computers are smart, so they convert these zero to ones to letters and numbers.

This is a complicated process and could be an article on its own, but essentially, you need to know three main things with hashing functions.

You can’t find the input of a hash; you have to guess and check. If you give it A, it will give you D, then if you give it AA, it’ll give you J, and then if you give it AAA, it’ll give you U.

Imagine if you wanted to find out what gave you an A; you’d have just to keep adding more A’s until you found it.

The second thing you need to know about hashing functions is that changing the input just a tiny bit changes the output a lot.

so basically if you do SHA-256 of this; “subscribe to our newsletter” you get this as the output. 👉8c03f38666a24aa8842e12e566e86c7f5ffd641914fa805ad0174d99826d1eb1

However, if you do “please subscribe to our newsletter” you get this 62792a671d42cb0948c036aff47e5a0bf3dff2cd76dc0deeef790368641f65fa.

These are entirely different even though we added one word.

Lastly, the third thing you need to know is that calculating the hash takes some time. It might only take a few milliseconds for one tiny string of text, but if you have an entire book that you’re doing or if you want to check a few million variations of it, it starts to rack up time and computing power.

What bitcoin is doing whenever you mine it is we’re trying to add random numbers to whatever the block is so that we get a special ending.

For example, let’s say we’re trying to mine this; X pays Y $50, A pays B $18, and Y pays H $15, you’ll get this as the output 👉bb501937554740331e9dac8f3bae481a6bc490fb3b5b35bdb1509b364dd21d37

Now, this is what bitcoin is doing. We ask ourselves what number do we have to add to the end of that list to get a zero at the end of the hash.

Well, if we start at zero, and then we check it with one, and then we match it with two, and we use my little python program, we figure out that it takes three different checks to get to the first one, which is when you put a two at the end of it.

Now, let’s make it a little harder let’s try two zeros at the end of the hash. After running my little python program, we figured out it takes 438 tries until you hit the first hash that ends with zero.

Lastly, just to drive the topic home, it takes a lot more time to find these hashes.

As we look for more zeros, it takes a lot more time to check it, and essentially bitcoin is looking for a lot of zeros and computers all around the world, and mining farms are mining away to find the correct number.

When they do, we say that that block is solved and verified. But we’ll get into that in a little bit. The next thing to know about a blockchain is that it is decentralized. This doesn’t have to be really confusing.

Think about it like this, centralized means one person controls it. For example, only your teacher had access to your grades in high school to add in your grades or change them.

They could flunk you if they didn’t like you and nothing personal here, but maybe you just didn’t understand what they were teaching because they sucked at teaching.

Anyways decentralized means that more than one person can have access to look at and change your grades. Imagine if all of your classmates were allowed to look at the answers on the test and give you a grade based on your papers and your tests.

Imagine if they could vote on what grade you got instead of just your teacher.

This is essentially what decentralized means; instead of one person having a list of all the bitcoin transactions, literally anyone who wants to can have them and look at them.

Not only that, this is the crucial part; anyone can mine and actually vote on the blockchain. This means they can say Bill really did pay john 50, or they could make fake transactions and say john paid bill all of his money.

You might be asking how do you make sure that someone doesn’t make a fake transaction and spend all of your money?

Well, that’s a problem that is solved by using asymmetric encryption with cryptocurrency wallets.

That begs the question, why would a group of teenagers want to look at your papers and tests even more so why would they spend a lot of time looking at them and then grading the tests?

Well, in this analogy, they would be paid. In every blockchain, you get a reward for participating and putting in good votes.

For example, for mining bitcoin, you get paid in bitcoin. I hope that analogy makes sense.

So far, we’ve been over what a block is; it’s just a bunch of data. What a hashing function is it’s to make sure that people actually put in work to participate in the blockchain. And we’ve gone over what decentralized means; it means that one person does not control it. 

Next up, let’s learn why it’s actually called a blockchain.

Why is it called a blockchain? 

With bitcoin, there are two extra things you need to know about.

1. Whoever solves the block and finds the magical hash that has many numbers of zeros

we’re looking for they add why Shavuna’s account received two bitcoins for mining at the top of the block, and this is their mining reward.

This is how more bitcoins are actually created, although the amount of reward changes, and it gets smaller and smaller as time goes on.

2. Secondly, you need to know that they add the hash of the last block to it, so the password of the previous block gets added to this block, and that hash is actually used to calculate this block’s hash.

This makes it a chain since each block refers to the last one. This is where the magic of the blockchain works; if you try to go back and edit an old block, the newer ones all change because you’ve messed up that hash that it pointed to.

Remember when we talked about the hashing function and SHA-256? If you change it just a little bit, it changes the entire thing.

Well, that’s how we can make sure someone doesn’t go back and add more money into their account in an old block. In a sense, whatever gets added to the blockchain is written down in history forever because it can’t be changed.

This is actually really good for things like transactions, but it’s terrible for things like copyrighted material or embarrassing things; it is the nature of the internet, though.

In conclusion, we have blocks that consist of data, and in the case of cryptocurrency, it’s usually a list of transactions.

Next, after we have a block, we have to find the password to that block or basically what is the hash that solves that block and miners do this by guessing and checking until they hit the jackpot, and then after they find the solution of that block, they make sure that it’s linked to the last block.

Each block actually has the history of every transaction on it because it refers to a previous block. Since each block is connected to the last block, this makes it a chain. That’s what a blockchain is.

I hope that we’ve made this confusing topic a little more helpful for you to understand. Thanks for reading this article, and if you enjoyed it, please share to reward our hard work. We hope to see you in the next blog post.