What is the Blockchain and how It works

The blockchain is considered a public ledger of all actions that are executed through the blockchain technology. What the blockchain actually looks like to the naked eye, is a random string of numbers and letters which can seem very confusing. To put more simply, imagine a literal chain of wooden blocks that a child may play with. As each transaction or action that takes place within this blockchain, (ex. purchases, contract agreements, record storage, etc.) new blocks are added to this linear chain. The blockchain is constantly growing as these ‘completed’ blocks are added. .


Let’s put this on a MUCH smaller (and more individual) scale to get a better understanding. Think of the blockchain as your debit card statements. You’re able to see every single chronological action that’s been recorded on your statement such as debits, transfers, and deposits. Each action that has occurred are those individual blocks that are added. On a larger scale, since the blockchain applies to everyone’s actions, think of the blockchain as a bank ledger, while each block is an individual’s bank statement.

The blockchain is a ledger that contains a secure record of every transaction that has taken place within a system.

While the bank analogy creates a better understanding, keep in mind that the Ethereum blockchain is able to execute far more than what the typical bank is capable of. Each block is a little wooden toy block of any information that’s written into the blockchain.

But how are these blocks added to the blockchain? The computer runs nodes that execute complicated mathematical equations to “form these blocks”. It’s tasked with validating and relaying each transaction before those new blocks are added. While this may seem easy, it’s far more difficult than one person (or computer) merely solving equations.

For a visual representation of what the computer does, let’s say you’re standing in the middle of a crowded city intersection and suddenly an extreme event takes place in the middle of that intersection. Then without any hesitation, (basically instantaneously), everyone who witnessed the event is then sitting in a chair, strapped down, and must recount the intense event in full detail. (They’re also attached to an infallibly accurate lie detector.) As they’re asked to recount the events, everyone ends up saying the exact same thing. Therefore, there isn’t any doubt that this extreme event happened.

In relation to the blockchain, (and how this analogy works), the people who witnessed the event are actually different computing nodes within the blockchain, and the lie detector test is the “proof-of-work”, which in the blockchain, is a cryptographic process for proving that the computer arrived at the correct outcome in the correct way. To make any events within the blockchain false, would be like getting half the people who witnessed that event in the middle of the busy intersection to all lie about seeing it, lie in the exact same way, at the exact same time, and without any coercion or prep beforehand.

Which is highly improbable, to say the least.
The blockchain allows people to know what is happening in the digital/cryptographic world. Transactions and transaction amounts can be traced to each blockchain address, but to identify who executed each action, is nearly impossible.