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  • Writer's pictureClaudia Campisano

What is blockchain?

"What is blockchain" article cover

Blockchain, as the term suggests, is a chain of sequential blocks. We can define it as a shared database (or distributed register technology) cryptographically immutable. It is structured as a digital record of all transactions and information entered and fractioned within the blocks. The validation of these transactions is delegated to a consensus mechanism distributed on all network nodes.

Blockchain technology representation

In a more simplistic way, a blockchain is a digital ledger distributed and managed by a network of computers or nodes, each of which has a copy of the transactions’ history.

The addition of each new block to the chain must go through a precise protocol based on the consensus of nodes. Each node updates its copy without any possibility of modifying the data once entered and validated. Thanks to this new technology and the extreme security guaranteed by encryption, a new concept of trust has been created.

A very informative video about the history of the blockchain produced by Binance.


How does blockchain work?

The fundamental element of any blockchain is the block, similar to a file, which is divided into two parts: the header in which a series of data are collected and the body in which all transactions belonging to that block are recorded.

Inside the block header, we find a lot of information and data

  • Block number;

  • Block hash code (The hash function is a mathematical system that converts a message of arbitrary length into a fixed length alphanumeric code message called digest or fingerprint. Several algorithms calculate the hash, such as the Secure Hash Algorithm or SHA 256, which generates a 256bit digest. The algorithm used to generate the hash of a message or a file ensures the irreversibility of operations and the impossibility of tracing the original message from the digest.)

  • Hash code of the previous block;

  • Timestamp (the date and time the block was produced);

  • Total cryptocurrencies handled in the block;

  • Block size (in kilobytes).

The blocks are inextricably linked to each other by a cryptographic chain system so that any changes to a copy of the database would not be effective if the other copies were not updated via the peer-to-peer transmission network.

How blockchain works, steps from transaction to execution

The blockchain is also based on an asymmetric cryptography system that involves the use of two keys, one public and one private, with which you can respectively decode and decipher a message exchanged between two parties. Only those who have the private key- from which the public key is generated- can decipher the encrypted data that has been transmitted to them.

Usually, the public key is the one with which you encrypt the message, and the private one is the one that allows you to decode it.

For example, in the Bitcoin blockchain, the private key is generated randomly, while the public key is derived from the private key, applying a one-way elliptical function. The public key is formed by a 512bit code generated by the cryptographic algorithm ECDSA (Elliptic Curve Digital Signature) and is used to verify the digital signature that marks the transaction in bitcoin without the need to disclose the private key.

To make any transaction and then send, spend (private key) and receive (public key) crypto assets on the blockchain, you must have two cryptographic keys to keep you safe inside the wallet.

An interesting article about the functioning of a blockchain.


Types of blockchain

The blockchain allows you to replicate information on various subjects, each of which has visibility of the entire information history that characterizes the process. With blockchain and, more generally, with technologies based on distributed registers, it is possible to achieve decentralized trust based on common knowledge of data and comply with shared rules defined and agreed upon according to decentralised governance models.

The distributed consensus mechanism can be different and vary depending on who has the ability to read, write and validate the transaction history on the distributed register and how it does so. In this regard, there are:

  • DLT permissionless (for example, Bitcoin; The validation of transactions can occur as a result of a cryptographic game whose rules have been shared and accepted by all and which puts the nodes into a competition. All nodes participate in the competition, but only the first that determines the solution receives a reward in the native crypto assets. This mechanism is called Proof-of-Work or PoW, and the validator node is the miner.)

  • DLT permissioned (In this category, only some subjects preselected from a third or external entity have the power to validate the transactions. This is a sort of centralization, the opposite concept of decentralization. This type of permissioned technology is divided into public and private.)

Permissioned Blockchain vs Permissionless Blockchain


Use-cases of blockchain

With its many benefits, blockchain is a revolutionary technology that offers a variety of potential uses. It can be used to create digital currencies or store information, such as medical records or voting data. It can also be used to track shipments across a supply chain, and it’s often suggested as a solution for cybersecurity. Because blockchain is so versatile, it could find applications in any industry.

Here are the most common potential use cases:

  • Financial Services: it can be used to transfer money, manage investments, and track supply chains;

  • Healthcare: to store medical records, track medications, and ensure patient privacy.

  • Logistics: to track shipments and prove authenticity.

  • Government: to increase transparency and voter integrity.


Examples of blockchain

The most popular blockchains known are Bitcoin and Ethereum, in which everyone can participate in the transaction validation process and contribute to the security of the chain, receiving a reward for their work.

For example, at the very beginning Bitcoin was rewarding miners with 50 BTC for every block, this block reward is now reduced to 6.75 BTC, thanks to the halving. This reduction reflects the increasing difficulty of mining all available BTC, which is 21 million.



As you can read, a blockchain is a distributed ledger technology (DLT) or a decentralized, shared database that collects different types of information. It differs from a typical database because it is used to store data above transactions in blocks that are linked together via cryptography.

The term blockchain means “chain of blocks”. The blocks are the main actors of a blockchain because they collected all the information in an immutable way, thanks to particular mathematics functions known as a hash. Each block includes three main elements

  • Stored data (depending on the nature and the features of that blockchain).

  • The hash is an alphanumeric string that identifies every specific block. Every time that a new block is created, a hash characterizes it in a single and unique way. If any information within the block change, it automatically changes also the number of the hash. This identifies a manumission by hackers, for example. A blockchain is immutable, which means that the data entered are irreversible.

  • Every block is linked with the previous one, thanks to hashes. This feature is not enough to maintain a blockchain safe and secure. This technology is based on a consensus mechanism (typically of peer-to-peer networks or decentralized systems). These mechanisms are called proof-of-work(PoW) and proof-of-stake (PoS).

Do you know other potential blockchain use cases?

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