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Blockchain 101 for Newbies

December02/ 2017

What Is “Blockchain”? – Most People Are Touting As “Web 3.0” Is The Technology Behind Crypto Currency… But What Is It?

Featured Keywords: blockchain, what is it

“Blockchain” is a new type of decentralized database which allows computer users to store, manage and edit data stored across 100’s or even 1000’s of servers.

The main reason why “blockchain” has become well-known is because it lies at the core of the majority of the new “crypto” currencies which have been attracting massive amounts of money due to their speculative trading.

Regardless of whether you currently hold any “crypto” currencies, or are planning on buying some (we do NOT recommend it), the most important thing to consider is how the “blockchain” database system works behind the scenes.

This tutorial is going to explain the fundamentals of the “blockchain” technology set, and how it fits into the world. Whilst not a wholly disruptive technology, there are some elements of its feature-set which could revolutionize how many people deal with their digital infrastructures…


What Is Blockchain?

The blockchain database system was designed in 2008.

The system was originally created to break the “client/server” paradigm that’s been built over the past 30+ years. Rather than having to go through a central data provider (be it a bank, government or business), “decentralized” data systems are able to provide “global” data access in a peer-to-peer setup.

In other words, this means that a user will be able to use an application to “talk” directly to other applications (for example in the case of a “chat” app), but have its data stored “globally” across its equivalent “blockchain” network.

What this means – in layman’s terms – is the ability to create applications independent of any central data storage mechanism. Today, every application (“client”) requires a “server” through which it sends requests and “payloads” (small chunks of data).

This data is then processed by the server and returned to the client for use by the user.

Whilst this works very well, it cuts out a lot of people from being able to use the multitude of data stored in the many “data silos” around the world — databases which keep the data locked away so that even if you had access, there would be no way to actually use it in the wider world.

Blockchain looked to open up this wealth of data so that new “decentralized” applications could be built with it.

For example, instead of relying on a central “email server” to save and create emails, you’ll have ubiquitous access to ALL your messages through a series of “blockchain” databases stored on 1000’s of servers.

Now, whilst this might sound interesting, it’s certainly not world-changing.

When considering the whole notion of “blockchain”, it’s not the technology itself but what you can do with it that counts. The following should explain its application in the wider world…


Why Is It Important?

Up until the development of “blockchain”, the most important element of the digital system was the ability for a “server” to process requests and send responses.

This request/response process lies at the core of all the applications in the world, especially online. However, it’s not really that effective…


  1. “Servers” become overwhelmed…
    Because each server / service is a central point, ALL the client systems rely on it to function properly & quickly.Unfortunately, due to the way in which the “Internet” has grown, and the increased prevelance of DDOS (Distributed Denial Of Service) attacks – it’s becoming increasingly common for servers to buckle under the strain of increased demand.As such, you need to appreciate that it can (and often is) the case that a “server” will either shut down or simply stop accepting requests if it receives too many at once. This is why some websites “crash”.This problem is only there because all the data has to be sent / processed through it. If there was a distributed processing mechanism, this would not be a problem.
  2. Companies can abuse/misuse the data (such as sell it)…
    Again, the privacy of data is forever in the news, with many companies actually selling your data or using it to sell more targeted ads.The problem with this is that since particular companies own the data (it’s stored on their servers and processed through their services), they’re at liberty to do as the law allows with it.This has not only lead to customer dissatisfaction, but can also be dangerous (identity theft is now easier than ever). The solution to this would be to make the data so encrypted that only its creator (the user) has access to it.
  3. The data can be hacked…
    Lastly, because the data is stored on large central servers, it can be hacked.This is now also being added to with a number of other problems in the form of “ransomware” – small pieces of software which have been developed solely to “encrypt” all the data on your device and hold you to “ransom” to remove it.This is not only well known but an increasing problem, especially with woefully poorly protected business data networks. This stuff is beyond the need for a firewall – some of the techniques employed by hackers today is incredibly sophisticated.

Ultimately, what this means that whilst the current paradigm “works”, there is room for improvement. And as with anything in a free market, the improvement will come from the market itself.

The biggest boon for “blockchain” databases is that their processing is decentralized as well as their storage. This is the crux, it means that not only will you be able to access data “anywhere” in the world, but pushing new data to the database no longer requires a central processing server.

This is massive… as it opens the doors for decentralized applications.

Decentralized applications are pieces of software which run on top of “blockchain” database systems. They work by allowing users to perform specific tasks (typically transactional) and then having the data not only stored, but also processed on the many servers (“nodes”) which make up a blockchain “network”.

This decentralized processing ability means that instead of relying on a large company, or bank, to provide access to “its own” data… you’re able to access ANY data from ANY blockchain database that you have access to…

And this is where “crypto” currencies rose from.

“Crypto” currencies work by encrypting particular types of data in a blockchain database. At their core, each of the “coins” is basically just an encryption algorithm which works to store data in such a way that only people with the decryption key (“coin”) can read it.  Find Out More about how Blockchain Works.

Bitcoin is a “public decentralized ledger of financial transactions”. It doesn’t have any core (“intrinsic”) value of its own and is basically a way to save what two or more people sent each other. That’s it… a 21st century cheque or even the likes of a “debit” card without the credit facility.

The magic of Bitcoin (& the other crypto’s) is that they work on their own “version” of the “blockchain” database system. Specifically, they not only store data & encrypt it, but are able to process the data in their distributed network of processing systems (known as “miners”).

Each time a “miner” successfully compiles a number of transactions, the “miner” is rewarded with new Bitcoin (that can be sold at a profit). This all works on the Bitcoin infrastructure, not behind some bank’s firewall etc. It might sound complicated, but it’s actually quite simple.

How Does It Work?

In a nutshell, “blockchain” is a combination of two pre-existing technologies –
“BitTorrent” and “GIT”.

You may have heard about BitTorrent. Used by illegal movie downloaders the world over, it’s predominantly associated with illegal activity. However, at its core is an interesting idea.

Rather than downloading a file directly from a single source, BitTorrent opened up downloads/uploads to a large number of “seeds” – computers spread around the world which had the file you wanted to download.

By switching between “seeds”, you were basically guaranteed a constant source for the file, rather than having to rely on a single server. Whilst this worked, the opposite was also apparent – if you had a file which other “leachers” wanted, your system would let them download it from you.

Blockchain works very similarly to BitTorrent, in that each time a new “block” is added to a database, the update is synchronized across the entire blockchain network for that particular “chain”. This is partly how the decentralized nature of the service works.

To explain how the other part of the service – the “chain” / “block” side of things – works very similarly to “GIT”. Git is a source code management system, which allows software developers to keep track of all the changes to a particular set of files/code.

“GIT” works with something called a “repository”. A repository is to “GIT” what a “chain” is to “blockchain” – a central list of files, folders and “data” which is tracked at all times.

Any changes to this data can be “committed” to the repository (to create a new “version” of the data) and then the repository is “pushed” to a server. With “blockchain” each new “version” of the data is said to be a “block” added to the “chain”.

Blockchain is nothing new. But many of the ways its applied may be.

The key thing is that you’re now able to get a


What Does This Mean For The Future?

So in terms of why “blockchain” might be considered an important “asset” in the digital world of the future, the most important thing to consider is where it fits into the likes of business.

One of the reasons why Microsoft, Apple etc became prolific was because they were able to create a “market” for the new PC technology that didn’t exist before. This adoption was built on the back of businesses buying the technology to further their own goals (either by allowing them to calculate their entire budget from one device, or helping them track stock market trends etc).

What it needs is a killer app.

In computing, the term “killer app” is used to describe a piece of software that’s so good it justifies the purchase of an entire hardware stack. The “original” killer app was “Visicalc” – which basically brought spreadsheets to the Apple II. This application was so powerful and desired that it justified the purchase of the $2,000 hardware to run it.

The same exists with “blockchain” – the underlying technology is actually very potent, but at present it has not been adopted by as many people as is required.

Many people have figured that “Bitcoin” could be “blockchain’s” killer app… but unfortunately, due to its inability to hold value, it will likely be relegated to the dustbin of time when another better-designed and better-funded solution comes along.  Learn more here.

The main angle of growth for the likes of “blockchain” at present lies in the “IoT” (Internet Of Things). IoT is widely seen as the next step for “the Internet” and for digital technology in general  – it’s the ability for different “devices” to connect to a central “intelligence” grid and then have that grid either issue commands, or allow them to manage their data etc.

Whilst IoT exists already, the problem is that every “device” you could put onto it requires a central “server” to store the data. If you have solar panels, they can only “send” data to a system which is able to accept it. This is one of the main reasons why the likes of an “IoT” toaster has not been mass marketed yet.

“Blockchain” actually gives us the ability to “share” and manage data with a set of central protocols – allowing for better communication between any devices you may wish to integrate into the new Internet. Whilst this may be several years away, it’s seen by most to be the next phase for the technology.






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