Ultimate Blockchain Guide: The Only Explanation You’ll Need 2023

    The hype around cryptocurrency and non-fungible tokens (NFTs) is ever-so-growing as the internet moves into the new decentralized era, the Web3. However, the brick-and-mortar holding this massive shift is still a mystery to the mainstream eye. The blockchain is the underlying technology that revolutionized how we store and record data and might be the life-changing technology that resembled the internet back in the 90s. So what is blockchain technology and why is it such a controversial technology? 

    Back when the internet first emerged, people were skeptical about the opportunity to communicate and share information from distance. The cycle is repeating again with the emergence of the blockchain as it provides a decentralized system of data records with no centralized authority. However, skeptics are right not to trust this emerging technology because one, it is still very early in development, and two, they simply don’t understand how it works. 

    This article would provide an extensive explanation of what a blockchain is, how it works, its usage, and the advantages and disadvantages of this newfound decentralized technology. The following post will walk you through step by step everything you need to know to stop feeling intimidated by the word blockchain and start flexing your technical knowledge among your friends! 

    What is a Blockchain? 

    The first thing to pop up when you look up the definition of blockchain is “The blockchain is an immutable distributed digital ledger that is shared among the nodes of a computer network.” But what does that even mean? If we dissect that phrase we’ll get:

    • Immutable: The blockchain is unchangeable and cannot be altered. 
    • Distributed: It is distributed to several places and not confined to one place. 
    • Digital ledger: Digital record of transactions or digital data storage.
    • Shared among the nodes of a computer network: The blockchain is distributed to several computer networks, with each computer being a node. 

    Therefore, the blockchain is simply a database or a distributed record of transactions that stores digital information. Unlike a regular database, the blockchain does not revert to one centralized authority. That means that no one owns the blockchain and therefore cannot control its data. The most common example of a centralized database is the typical bank. 

    The Importance of the Blockchain

    The regular bank keeps records of all its customers’ transactions, funds, and other data. That makes the bank a central authority where all data exist in one place. If something were to happen to the bank, in cases of governmental corruption, you might not be able to withdraw your own money.

    So technically speaking, you need the bank’s permission to access or move your funds. The centralization of banks has spawned many social and political movements arguing against the connotation of banks being “too big to fail.” Because in reality, their centralized aspect makes them highly prone to failure. 

    Bank vs blockchain

    This is where the blockchain comes into play. The blockchain’s innovation lies in its decentralized nature. Instead of a single authority managing and controlling its database, the blockchain’s infrastructure is distributed to thousands of computers that work together to operate it. Unlike the bank, if one computer were to forfeit from operating, the blockchain will stand still. 



    How Can You Trust a Blockchain?

    The question is how can you trust a database or a record of transactions if there are no central authorities to monitor it?  

    Central authorities act as the third party or middleman between transactions. Let’s say a person wanted to sell a car. The buyer will make the transaction by paying the necessary money to the seller, who in his turn transfers the ownership of the car to the buyer.

    However, both parties cannot be trusted. They both can lie about whether they receive the money or pay it. That’s why central authorities, like banks, supervise and validate these transactions.

    Bank vs blockchain2

    So, is implementing a decentralized blockchain a step backward? It’s actually a step forward. 

    Blockchain stores data in groups, known as blocks. When a certain “block” fills up, it closes and links to the previous block, thus forming a “chain” of data. Moreover, every new chunk of data or information will be closed into a block and strung together to the last filled block, and so on.

    All transactions must be approved by the computing networks operating the blockchain before they get sealed into a block. This system of storing data creates a chronological chain of information that no one can alter or change.

    Thus, no one can lie about whether they paid the money or not since it is recorded on the blockchain. Any corruption in the blocks will result in corrupting the entire ledger. This way, the database of transactions becomes secure, immutable, and independent of any centralized authorities. 

    Blockchain Verification

    So the blockchain has two fundamental properties: 

    • Decentralization: The decentralized property of the blockchain protects it from network attacks. 
    • Immutability: Since the data of transactions is stored on sealed blocks chained together, you can always trust the blockchain for accurate information. 

    How Does the Blockchain Work? 

    We’ve discussed how the blockchain groups transactions into blocks to form a chronological chain of data. But how does it work really? In order to truly understand and trust this decentralized technology with your money, you’ll have to delve a little deeper into the mechanics of the blockchain. It’s easy to say that it’s hard to hack this digital ledger, or that it’s operated by thousands of computers, but that doesn’t mean anything if you don’t know exactly how the blockchain works. 

    Blockchain Demo

    A blockchain demo is available to illustrate how the blockchain actually functions. It can simulate things like hashing functions, blocks, transactions, private and public keys, and much more. Using Anders Brownworth’s blockchain demo, we can simulate and explain how the blockchain actually works. Make sure to check the demo out while reading to get the real experience of the blockchain simulator. 

    Now, let’s get technical for a bit and go step by step into the functionality of the blockchain.

    Blocks of Data 

    Blocks of Data

    A block is simply a computer file that stores transaction data. Blocks are arranged in a linear manner to form an endless chain – thus, a blockchain. Therefore, all information about transactions is gathered and recorded inside each block. Blocks have a certain capacity for information added.

    When a block is filled and cannot contain any more data, it gets sealed and linked to the previously validated block of transactions. The Genesis block is the first block in a blockchain.

    Blockchain blocks

    So, how are these blocks connected?

    Hash Functions

    Hash Function

    In order to link each block of data to the previous one, an identifier of some sort has to be implemented to showcase how each block is linked to the last. 

    Let’s say Block 1 and Block 2 have a number of transactions and have been validated and sealed. A new block, Block 3, needs to be linked to Block 2 in order to form a chain. How would that be possible if there are no identifiers? 

    Let’s say we give Block 1 as the Genesis block an identifier by the name “one000”. 

    Block 2 has an identifier “two834” with a previous name of “one000

    Therefore Block 3 would have an identifier as “three945” with a previous name of “two834

    These identifiers are allegories for the hashing functions that the blockchain uses in order to link blocks together. 

    What is a Hash?

    Hash is the equivalent of a fingerprint of digital data and acts as the glue that holds each block together. A hash is a mathematical function that turns arbitrary input of data into an encrypted output. Think of it as the password for certain digital data. The hash will always be at a fixed length no matter the size of the data. By using Anders Brownworth’s blockchain demo, we can illustrate what a hash looks like. 


    The Data blank field is the input of information, while the Hash field is the encrypted output. We can notice that a blank input already has its hash value set as e3b30c44…, that is because “nothing” or “no input” also has its encrypted fingerprint. 

    Hash Chainwitcher


    However, we can see that by typing the word “Chainwitcher”, the hash value changed to begin with c5165a… This hash value will always be the same for the input “Chainwitcher”. Therefore, the same data will always produce the same hashed value. 

    Hash values change with each character, we can see it in the above example by just adding the letter “s” to “Chainwitcher”. The hashed value changed from c5165a… to 996422.. Even the casings of the first letter of “Chainwitcher” resulted in a different hash value. 

    Hash Value

    Hashing algorithms are a one-way function. That means it’s nearly impossible to reverse-engineer a hashing value. That means, generating a hash value from an input is relatively easy, however, uncovering the input from the hash value is quite hard and impossible to do without massive computing times and resources. 

    Blocks Using Hash Value

    Blocks Using Hash

    To relate back to Blocks 1, 2, and 3 which are linked together, we established by now that their identifiers are hash values. 

    Therefore, Block 1 should look like this. 

    Block 1

    We can see that Block 1 has a:

    • Block Number
    • Nonce Value
    • Data Field
    • Hash Value
    • Mine Action

    The Data field is the same as we saw before. Each input in this field will generate a unique hashed value. In order for a block to be a valid block, the hash value needs to start with 4 zeros, in this case, 0000f7… 

    If we typed in any input in the data field of the block, the chances to get a hash value that starts with zero are pretty low. So if we put in the same “Chainwitcher” data, the green box will turn red signifying that the block is invalid. 

    It will look something like this: 

    Block Invalid

    This is where the Nonce value comes into play. The Nonce is a random number you can alter to generate a hash that starts with 4 zeros for a specific input. However, there are millions of probabilities to try to hit the exact Nonce number, and that’s what mining is for (more on that later on). If we press the mine button, it will find a Nonce value that will generate a valid hash.

    Block Valid

    Linking the Blocks

    Linking Blocks

    After having a validated block of data, we can now see how blocks are linked together through the hash value. 

    Blocks Hash

    Here we have 2 blocks of data. Block #1 and block #2. We can notice that each block has two sets of hash values. The first hash value corresponds to the previous block’s hash. The second hash value is the block’s own hash. 

    Since block #1 is the genesis block, the previous hash value is a bunch of zeros and its own hash starts with 00001578. 

    Block #2 has a previous hash that correlates with block #1’s hash of 00001578 and has its own hash of 000012fa. 

    If we were to alter the data field in block #1, it will not only make the block invalid, but it will also make all future blocks become invalid as well. 

    Blocks Invalid

    Even if we were to mine block #1 to validate it, the rest of the blocks will still be invalid. And you’d have to mine every single block that comes after, which would be a hassle. Therefore, if a block gets tampered with, the whole blockchain will become corrupt. This is where the immutability of the blockchain lies. 

    Blocks Hash

    Distribution of the Blockchain

    Distribution of Blockchain

    Since the blockchain is a distributed ledger, that means each computing network keeps its version of the ledger to validate new transactions. All versions of the blockchain need to be the same in order to authenticate the blocks added. If a computing network tampered with its version of the blockchain, it would be noticeable. 

    Let’s say Peer B has tampered with his version of the blockchain. Even if he mines the block to render it “valid”, the hash number would expose him. Let’s compare the blocks below. 

    Peer A ValidPeer B InvalidPeer C Valid

    We can notice that all blocks lit up green. That means they’re valid, right? Well if we look closely, we can see that block #2 of both Peer A and Peer C’s blockchain has a hash value of 000012fa. While Peer B’s blockchain has a hash value of 0000ad7 for block #2. This means that Peer B has tampered with its version of the ledger, thus making it corrupt. 

    Blockchain Transaction


    Transaction Blocks

    Similar to the example before, a blockchain transaction will function using hash values. However, now instead of a general text Data field, we have actual currency transactions between people. But this might seem disorganized and mismanaged. Who says that Darcy has $25.00 to give to Bingley?

    The blockchain here does not record a balance of money like that in the bank. It only tells you a transaction of money has been made between two parties. So, how does it work in this case? 

    A Coinbase transaction grants a certain amount of currency to a specific person. In this case $100 to Anders in the first block. That means that all the transactions made in block #2 are valid since Anders has already $100 to give. 

    Coinbase Block

    If we go further to block #4, we can validate that Sophia can send Jackson $8 since Anders gave Sophia $10 in block #2, and so on. And this way, the blockchain keeps track of all transactions to know who owns how much money. 

    Coinbase Block 2

    Private and Public Keys 

    Private-public keys

    The blockchain doesn’t record transactions using real names as we saw in the examples above. Instead, it uses Public-Key Cryptography (PKC) technology. This technology is used to encrypt and decrypt transactions by using public and private keys. 

    The public key is linked to the private key and enables you to receive transactions on the blockchain. For example, if you want someone to send you a transaction, you simply share with them the public key to your wallet.

    However, in order to access the currency you’ll need the private key to unlock them. That’s why it is important not to share your private key with anyone, since they’ll be able to access your funds. The private key gives you the ability to prove ownership of the public address. Think of the public key as your username and the private key as your password. 

    The public key is generated from a random input in the private key. Just like the hash, Public-Key Cryptography is a one-way function. Meaning, it is impossible to reverse engineer the private key from the public key. 

    Private public Key


    Digital Signature 

    Digital Signature

    So, transactions on the blockchain are recorded between two public keys/addresses. That’s great. However, who is to say that you actually sent a transaction? Everyone knows your public keys, isn’t it easy to forge a transaction? Well, here comes the role of digital signatures. 

    In order to verify a transaction is authentic, you as a  sender need to sign it digitally to prove that you are the owner of the funds. 

    Digital Signature

    When sending funds from your public address to another person’s public address, you must sign the transaction using your private key. A transaction is always encrypted using a public key and can only be decrypted by an accompanying private key. 

    After signing the transactions using the private key, a message signature is then generated. This signature is generated by combining the private key and the data of the transaction. Therefore, the computing network will then authenticate the message signature as a valid transaction.

    The final blocks will look something like this:

    Final Block

    Blockchain Validation Process

    We’ve established how a blockchain database works, from signing a digital transaction to linking blocks of data together using hashing functions. You might think that this stops here, however, there’s more to come.

    We’ve gone over how computing networks verify the blocks of transactions and link them together to form a digital ledger. The question is, since no one owns the blockchain, who does the verification? Do all the networks verify the same block? If so, doesn’t that create chaos within the system? It does actually, that’s where consensus mechanisms work their magic. 

    Peer-to-Peer Blockchain 

    Before we dwell on the process of blockchain validation, let’s go over the infrastructure of the blockchain. It is easy to say that the blockchain is a decentralized ledger, but how does this decentralization actually work? The blockchain uses a peer-to-peer network as the basis of the technology.

    Peer-to-peer networks are decentralized networks of interconnected devices that share files between them. These devices are called “peers” and they act as the sender and receiver of digital files. 

    To better understand peer-to-peer networks, we can compare it to typical client-server systems. Most internet networks use the client-server architecture. This model consists of a single server that hosts digital information. For example, Chainwitcher uses a client-server model, where articles exist on its server. A user can always access the articles as long as the Chainwitcher website is available. Once the website shuts down, so will all the articles. 


    In contrast, peer-to-peer networks don’t utilize central servers to store data. Instead, all digital information is stored on each peer’s computer. Which makes the peers both the server and the user at the same time.

    The blockchain uses this network to negate its need for a centralized authority or hosting server. In this case, unlike the client-server model, the blockchain cannot shut down. If one or more peers shut down their computers, the digital information of the blockchain will still be available due to the thousands of peers operating the network. 

    Peer-to-Peer Network

    Blockchain Nodes 

    We’ve discussed before how each peer has its version of the digital ledger. This way, the blockchain can always be verified by looking at the backups from each peer. The machines that are connected to the blockchain are called nodes (peers). These nodes are the ones that store the copies of the blockchain and share them with other machines. Therefore, they are authorized to validate and verify transactions, monitor the blockchain’s activities to ensure system security, and maintain consensus of the distributed ledger. 

    Nodes could be both online and offline. Online nodes are receiving and broadcasting the latest version of the blockchain to all nodes. Offline nodes do not. However, an offline node can go back online but has to download all the new blocks that were added to the blockchain after it went offline. 

    Technically speaking, the blockchain can run on one single node, but that would make it central and prone to attacks. When blockchain data is distributed across many devices, it will be hard to hack the system. 


    Blocks are systematically added to the blockchain after each transaction is verified. But who verifies and adds these blocks? Do all nodes contribute to adding blocks to the ledger? Not exactly. Miners/validators are nodes that validate each transaction in a block in order to link it to the rest of the chain.

    Thus, miners/validators are a crucial part of the network that provides security. Moreover, blockchain miners receive minted coins as a reward for completing blocks of verified transactions. 

    It’s vital to differentiate between miners/validators and nodes. Miners/validators always have to run a full node in order to validate transactions. Full nodes are online nodes that keep the blockchain history always updated. However, nodes are not necessarily a miner/validator. A node running on a device broadcasts and saves all transaction data without creating new blocks or validating transactions. 

    Miners vs Nodes

    The Byzantine Fault 

    So, we’ve established that transactions need to be verified by validators running a full node in order to add the block to the blockchain. Great! However, here comes a major problem caused by the decentralization of this digital ledger. 

    The Byzantine generals’ problem is a game theory that discusses the underlying issue of decentralized parties reaching a consensus without the help of a trusted central authority. The name comes from a theory analogy about several generals besieging Byzantium.

    Each general is surrounding the city from one location without the ability to communicate properly. The only form of communication is through messaging. The only way to conquer Byzantium is if all generals attacked at the same time.

    However, Byzantium’s defenders can intercept the communication and deceptively make half of the generals attack, which results in the generals failing.  The same thing happens to the blockchain nodes and validators if they do not come up with a system for operating the ledger. 

    The Byzantine Fault

    Let’s say a transaction occurs between the public address 4be23 and 8fa99. For the sake of this example, we’ll call 4be23 “Person A” and 8fa99 “Person B”. 

    Person A sends Person B 10 ETH and signs the transactions with his private key for verification. This transaction gets broadcasted to the network. 

    Validator 1 and Validator 2 both verify the transaction in the block and add it to the blockchain. 

    In this case, the transaction happened twice and Person A spent 20 ETH instead of 10 ETH, which is known as double spending. 

    In order to systemize the blockchain and solve the Byzantine fault, consensus mechanisms were implemented in order for all nodes to agree on which transactions occur and in what order. 

    Proof-of-Work Consensus

    Proof of workk

    In order to solve the Byzantine generals’ problem, the blockchain operates through consensus mechanisms that regulate the system and prevent tampering. One of the first consensuses to emerge is the Proof-of-work consensus.

    PoW requires nodes to provide evidence that they had “worked” enough to be chosen as the miners. The evidence consists of nodes competing against each other to solve complex computational puzzles. 

    These puzzles are just a process for targeting a certain hash value. Generating any hash from a transaction input is pretty trivial and easy. So to kick up the challenge for miners to prove themselves, the trick is to generate a very specific “target” hash. The lower the target, the smaller the set of valid hashes and therefore, the harder it is to generate one. For example, the target hash could be a long value that starts with a specific number of zeros. 

    The first miner to successfully hit the target hash “wins” and gets to add the records of validated transactions into the next block of the blockchain. Miners who successfully solve the hash puzzle will be rewarded with cryptocurrency. The downside of this consensus is that it requires massive computational power which has a big harming impact on the environment

    Proof-of-Stake Consensus

    Proof of stakee

    A proof-of-stake consensus doesn’t require the act of mining. Instead, miners become validators. Instead of validators using massive computational power to solve hashing functions, they “stake” a significant portion of their funds. Once a validator stakes their funds, they get randomly selected by the protocol to add the next block.

    Unlike PoW, validators don’t receive awards for validating a transaction, instead, they receive a transaction fee. 

    To become a validator, a coin owner must stake a specific amount of currency. For example, the Ethereum blockchain requires individuals to stake 32 ETH in order to become a validator. PoS reduces the amount of computational power needed to verify transactions, meaning less impact on the environment. 

    Recap of Blockchain Transactions

    We’ve basically gone over the process of the blockchain transaction from hashing to consensus mechanisms. So, let’s gather all information and get a recap of how blockchain transactions work for a transaction between Person A and Person B. 

    • Making a transaction 
      • Person A comes up with the private key of 374859. He generates a public key from the private key to get the public address 536b1c
      • Person A sends 10 ETH to Person B using his public key. Person B’s public address is 7fa123
      • Person A signs the transactions using his private key to generate a digital signature. 
    • Validating the transaction
      • The transaction is broadcasted to the network of nodes operating the blockchain
      • Each node keeps a record of the history of the ledger
      • In a proof-of-work consensus, all miners would try to solve the hash function puzzle by figuring the exact Nonce value to generate the target hash. The winner gets to add the block and wins an award. 
      • In a proof-of-stake consensus, validators will stake their funds for a chance to be randomly selected to validate the transaction. Only the winner will validate the transaction by solving a simple hash value. 
    • Adding a block to the blockchain
      • After the winning miner/validator validates all transactions in a block. The block will be added to the blockchain by having its own hash value and the previous block’s hash value. This way, all blocks are connected. 
      • Any tampering with the transaction data will generate a different hash value, and blockchain nodes can detect the faulty block by comparing it to other versions of the blockchain. 

    Here’s an infographic that summarizes the whole process.

    Blockchain Transactions Process (2)

    Blockchain Evolution 

    The first blockchain concept dates back to 1991 as an idea of securing a chain of records cryptographically. The concept was introduced by Stuart Harber and Wakefield Scott Stornetta. Two decades later, Satoshi Nakamoto, a pseudonym of a person or a group, gave the technology a model back in 2009. 

    • Blockchain 1.0 (Cryptocurrency): The first iteration of blockchain technology consisted of currencies and financial transactions using decentralized ledgers. Bitcoin was the first digital-only currency money system based on decentralization. It represented the first stage of blockchain history as a money transaction system. 
    • Blockchain 2.0 (Smart Contracts): The second big development of the blockchain was the concept of smart contracts. Smart contracts are small computer programs that execute automatically predefined conditions. These contracts are impossible to hack and reduce the cost of verification. The most prominent blockchain that implemented smart contracts in this development is the Ethereum blockchain which emerged in 2013. 
    • Blockchain 3.0 (DApps): DApps are decentralized applications. Most DApps run their backend code on a peer-to-peer network to avoid centralization. DApps use frontend and UI technology like any traditional app. You can say that DApps are smart contracts with a front end. 
    • Blockchain 4.0 (Industries): The security provided by the blockchain made it very appealing to industries outside the financial sector. Blockchain technology is starting to power many different areas such as supply chain management, financial transactions, condition-based payments, Internet-of-Things collections, health management, asset management, and many more. Moreover, Blockchain 4.0 brings the technology to real-life applications. 

    Blockchain Evolution

    Types of Blockchain Networks

    The evolution of the decentralized ledger has bred different types of blockchain technology. These types came into existence from the need of adapting the blockchain to different industries. There are 4 main types of blockchain networks:

    Public Blockchain 

    Public Blockchain

    The first type of blockchain that popularized distributed ledger technology and was the initiator for the Bitcoin cryptocurrency was a public blockchain. In this type of blockchain, anyone can contribute and conduct transactions.

    It’s open and permissionless to truly push the decentralized concept. Moreover, it is a peer-to-peer network where every peer stores a copy of the blockchain and verifies transactions making it a secure and open platform. Anyone with an internet connection can access the public blockchain, and therefore, access the full history of records. 


    • Secure: Since the public blockchain is built on a peer-to-peer network, the many participants that act as nodes make sure that the blockchain is authentic and not tampered with.
    • Trustable: The public blockchain operates using consensus mechanisms, which means that nodes don’t have to trust each other because a consensus is being applied. 
    • Transparent: The whole history of transactions is transparent for all members of the nodes, making the authentication process easier. 


    • Slow: Some public blockchains are still using the proof-of-work consensus which minimizes the number of transactions done per second. 
    • Scalability Issues: Since the verification of transactions is a slow process, it hurts the scalability. The more the network expands, the slower it gets.
    • Sustainability: Blockchains operating on proof-of-work consensus need a huge amount of computational power that will ultimately have negative impacts on the environment. 

    Private Blockchain

    Private Blockchain

    The private blockchain, also known as a managed blockchain, is a permissioned blockchain that is operated by a single entity. The central authority determines who can act as a node and doesn’t grant equal rights to all node operators. Although it functions as a peer-to-peer network, it is much smaller than a public blockchain that usually operates on a small network inside a company. 


    • Fast: Since the private blockchain is smaller than a regular one, the network has a smaller number of nodes that can get transactions done faster.
    • Scalability: The central authority can manage the size of the network and decrease or increase the number of nodes. 


    • Trust: Since the nodes are fewer, the validation process is not always trustable. 
    • Low Security: Fewer nodes create an easy door for attacks. 
    • Centralization: Private blockchains need a central authority in order to function. 

    Hybrid Blockchain

    Hybrid Blockchain

    A hybrid blockchain is, you guessed it, a hybrid of both private and public blockchains. It functions as a private blockchain with a permissionless system like a public blockchain. In this case, the central authority dictates who has the right to access certain private data and what data is available to the public. However, in the hybrid model, the transaction history and record are not public, but they can be accessed by certain individuals if granted access. 


    • Secure: A hybrid blockchain functions in a secure environment, making it secure against attacks.
    • Low Transaction Fees: Since there are a small number of nodes doing the transaction validation, the transaction fee is lower than other blockchain types. 


    • No Transparency: Since the history of transactions is private, the lack of transparency might create trust issues. 

    Consortium Blockchain

    Consortium Blockchain

    Consortium blockchains are simply private blockchains that are controlled by several authorities instead of central ones. That means that the consortium blockchain is more decentralized than the regular private blockchain, which increases the overall security.

    However, operating a consortium blockchain is quite difficult since it requires different organizations or entities to come to terms with decisions that can create logistical issues. The consensus mechanisms used in this blockchain are predetermined. In addition, a validator node is responsible for validating transactions, while a member node is responsible for initiating and receiving transactions. 


    • Decentralized: A consortium blockchain differs from a private blockchain by having multiple owners from different organizations. 
    • Secure: In some way, the consortium blockchain is secure since validation only occurs by trusted nodes only. 


    • Corruption: The blockchain can easily be corrupted or tampered with if one of the owners is corrupt.
    • Difficult to Manage: Setting up a consortium blockchain can become a hassle since it requires every member to agree on a communication protocol.

    What is Blockchain Scalability?

    Scalability is a term to describe how well a system can manage increasing amounts of data. In the case of blockchains, it measures how many transactions a blockchain can handle. For example, the Ethereum blockchain is at a rate of 30 transactions per second (TPS) while Bitcoin can handle 7 TPS.

    Although seeming a normal number, when placed next to centralized networks, the difference is huge. For example, VISA can have up to 1,700 TPS. However, you should not confuse scalability with speed. The speed in which transactions occur relates to the consensus applied, whether scalability has to do with speed and block storage capacity.

    Some solutions can be both on-chain scaling and off-chain scaling. On-chain scaling solutions refer to reducing the size of transactions or optimizing how data storage occurs on a blockchain. Off-chain scaling solutions refer to batching transactions off-chain and adding them to the blockchain later on. 

    What is a Blockchain Fork?

    Since the blockchain is a peer-to-peer system, the different nodes operating should agree upon the state of the ledger. However, the nodes don’t always agree or come to terms on a consensus regarding the future state of the blockchain. This results in blockchain forks. A blockchain fork is when the ledger splits into two or more chains that are all valid forms of the blockchain. This split leads to soft forks and hard forks.

    Soft Forks

    A soft fork is when an update happens in a backward-compatible way. Meaning that the new update does not clash with the blockchain’s current state. Thus, the updated nodes can still interact with nodes that are not. 

    Soft Fork

    Hard Forks

    A hard fork is opposite to its soft counterpart. Meaning that an update happens in a non-backward-compatible way, thus implementing new rules. In this case, the updated nodes will not be able to communicate with non-updated nodes, resulting in the splitting of the blockchain into two separate chains. 

    Hard Fork

    Advantages and Disadvantages of Blockchain

    Blockchain technology has certainly proven itself to be the upcoming revolution in data storage and financial transactions. However, like everything in the world, nothing is perfect. The blockchain’s various benefits also meet some disadvantages. Here are the advantages and disadvantages of the immutable ledger of records. 


    • Decentralization: The blockchain uses a  peer-to-peer network and is distributed across thousands of network nodes across the world. Each node can replicate and store a version of the ledger on its own device. If a single node goes offline, the blockchain remains the same. 
    • No Third Parties: Since it’s a distributed ledger, that means that no one owns the network. Meaning, no government, organization, or institution has control over or can operate the blockchain. 
    • Transparency: Since the blockchain is a public ledger that anyone can access, all transaction history is transparent. Any changes that occur can be easily detectable. 
    • Censorship: Blockchain technology is free of censorship since it is not controlled by a single entity. Unlike a traditional database that regulates the operation of networks, the blockchain has no regulation over what the data holds. 


    • Scalability: One of the major issues regarding the blockchain is that it’s not scalable. Meaning, there’s a limit to the number of transactions per node. Due to the size of the bock. Regular banking and financial procedures are faster and more scalable than the blockchain.
    • Energy Consumption: Blockchains that are still following the proof-of-work protocol result in huge energy consumption due to the computational power it needs to solve the hashing puzzles. 
    • Speed: Blockchain transactions are vastly slower than a traditional database. That is due to the fact that blockchain requires signature verification and relies on time-consuming consensus mechanisms. 
    • Storage: Blockchain ledgers are becoming bigger and larger with each day and this rate is getting ahead of the growth in hard drives. This could lead to the network losing nodes because node operators cannot download such large sizes. 
    • Legal Concerns: The legal applications are not yet fully caught up with the rapid growth of the technology, and there are risks of the blockchain being regulated by governments.

    Double-edged Sword

    • Secure: The blockchain is a distributed network of nodes with no central authority. If an attack was to occur, there is no single point of failure. However, it is not safe from all attacks. 51% attacks can occur if a single entity took over more than 50% of the nodes operating the network. 
    • Immutability: The immutability of the blockchain is a great aspect of keeping the records safe from temperaments. However, this could also be a disadvantage since it is very hard to alter data errors. 
    • Anonymity: The blockchain offers users full anonymity which can be a great feature. However, some have exploited it to perform illicit acts. 

    Blockchain Usages

    Blockchain technology extends far more than its mainstream use case which is a cryptocurrency exchange. In fact, the blockchain was created to be used in several industries to increase fairness, transparency, and security. Here are some of the blockchain use cases. 


    Medical records are sensitive information in need of a trustable and secure storage system, and the blockchain offers just that. The immutability and transparency of the blockchain make it an ideal ecosystem to store and exchange patient data between hospitals, laboratories, pharmacies, and other medical entities. Using blockchain technology can enhance the healthcare systems’ performance and reduces the margin of error. 

    Health Care

    Property and Real Estate

    Real estate investments can become an easy task when using blockchain technology. Buying, selling, or investing in a property can become a tedious task and vulnerable to human errors. Once the process moves to the immutable ledger, it becomes a faster and more reliable way of property investment. Since the history of a certain property is transparent for all parties to see, the blockchain would reduce the likelihood of fraud. 

    Real Estate


    Major gaming companies are investing in the blockchain, seeing it as an efficient way to sell in-game assets and protect the online community from fraudulent entities. For example, some games have their own online digital assets market where they exchange things like weapons, skins, special powers, etc. Introducing the blockchain in such cases can present users with a detailed history of each item sold on the market. Let’s say a specific weapon has a specific amount of *kills*, this attribute would be available on the smart contract. Thus, players can detect legit assets from fakes. That’s what the multinational company Sony did in its latest blockchain update



    What better way to secure governmental documents and create a transparent political engagement than the usage of the immutable blockchain? Some countries are actually tokenizing some of their governing documents to be recorded on the blockchain. Moreover, the blockchain can serve as a great way to hold political figures accountable through smart contracts and become the best secure and transparent voting ecosystem. The electoral process can become easy and trustable and expose voting corruption. 


    Creative Industries 

    Some creative industries such as music, film, art, photography, writing, and many more can benefit from blockchain by revolutionizing the rights and royalties process. This way, smart contracts can ensure all parties associated with a certain work are rewarded. Moreover, the transparency of the blockchain can ensure copyright protection for each creative work and differentiate between original and derivative works. Not to mention the cut in intermediaries and greedy mega-corporations that profit off an artist’s work. 

    Creative Industries

    Supply Chain 

    The lack of communication and transparency that dominates the supply chain and logistics sectors for many businesses is placing a strain on the handling of the goods between supplier and consumer. In addition, this data gets tossed around and altered from company to company since each has its own logistics terms. However, shifting to an immutable database can ensure transparency as the source of verification is one. It can also make the logistics process easier and more automated, saving huge operation costs. 

    Supply Chain


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