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Blockchain for Beginners

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5 min read
Blockchain for Beginners

Explore the modern technology that is blockchain and find out why it's at the forefront of the cryptocurrency revolution.


Blockchains are one of the core concepts worth exploring when you want to get more familiar with cryptocurrencies or just trying to get a better understanding of how bitcoin works. While some of the concepts surrounding digital currencies can seem complex, blockchains are something that anyone can understand when the idea is broken down a little.

What is a Blockchain?

Frequently referred to as a form of Distributed Ledger Technology (DLT), a blockchain can appear similar to a traditional database but has some key differences. Using the power of majority at scale consensus, blockchains can ensure that all network participants don’t just remain honest but are highly incentivized to be so, which can be very effective. If one person was in control of verifying all the transactions in a network, fraud could easily slip through the cracks. Still, when there’s an army of people all checking the transactions for validity, this gets much harder the more the network grows.

The Benefits of Blockchain Technology

  • Increased transparency
  • Immutability (unable to change history)
  • Easier verification
  • Reduced costs by removing intermediaries
  • Increased efficiency
  • Decentralized & distributed

Private Blockchains

As traditional industries have begun to take an increased interest in blockchain technology, the topic of private blockchains shows up more frequently. However, the problem with this concept (and the likely reason that uptake of such systems has been minimal) is that many of the benefits of DLT are lost.

Arguably a private blockchain loses what makes a public blockchain so effective and leaves little more than a traditional database with centralized control in its place. Perhaps better forms of hybrid blockchains will be developed in the future, but for now, most interest is following public blockchain projects like bitcoin.

Blockchain Security

Changing the past is something that can be a concern with traditional financial transactions, but this is something that blockchain technology can help you avoid. As blocks are added to the chain, it becomes more difficult to change the past. Outside of the majority of the network coming to a consensus on changing the blockchain, it’s improbable you’d be able to revert or reverse a transaction once it has received a few confirmations. The larger the network is, the more difficult this becomes.

One of the significant benefits of blockchains is their distributed nature. If you could take control of at least 51% of the network, you could attempt to push your version of the truth on the network, but again with more extensive networks, this would be incredibly difficult due to the costs involved and the resources required. Furthermore, even if you were to change your local copy of the ledger, you’d have to get the network to agree for it to be considered valid, something you’d be unable to do under normal circumstances. Also, if you were to pull off some form of drastic change to a blockchain via this form of attack, the rest of the network would likely notice and fork away from you, resulting in your efforts and expense being for nothing.

Blockchains can be far more secure than a centralized database, and there’s no need to rely on one sole point of truth and no single point of failure. The lack of decentralization is why before bitcoin, most attempts to create forms of digital money failed to get off the ground. It’s simple enough to make a rudimentary digital currency; it’s challenging to create one trustworthy enough to become useful, which is why blockchain has enabled bitcoin and many other cryptocurrencies to shake up how it’s possible to exchange value.

Using a blockchain enables you to transact, share, and exchange in ways that otherwise would not be practical or sometimes even possible.

Blockchain Nodes

Nodes are an essential aspect of blockchains as they ensure that copies of the ledger are widely distributed and not centralized. Comparing notes is what helps keep the network honest, and this is where nodes come into the picture. If you tried operating a blockchain with only one node, you’d have a single point of failure and something that resembled a common database.

People choose to operate nodes for various reasons, this can be to verify your own transactions, but for many, it can be purely to support the network. It’s common among more hardcore bitcoiners to run a full node at home that contains a full copy of the bitcoin blockchain. Many platforms that involve the use of blockchains operate their own nodes, and this is something we do at LocalCoinSwap to help ensure we are providing the safest possible service to our users. Integrity is essential when it comes to blockchain, and this is at the heart of what makes blockchain nodes so important.

Growing a Blockchain

While not every blockchain requires mining to operate, many do; the most well-known example is bitcoin, which uses a popular approach called proof-of-work to mine blocks and extend the chain. Miners are incentivized to process transactions and include them in blocks to gain rewards. Mining on a blockchain like bitcoin involves trying to find the solution to complex mathematical problems before other miners on the network so that you can receive a block reward. How much this reward is will vary between different blockchains. However, having a reward is pretty consistent for blockchains that require mining, as it’s essential to incentivize miners to secure the network and grow the chain so the network can continue to operate and the blockchain can be useful.

Once the solution is found, and a block is mined, the results can be passed onto the nodes in the network. If the nodes consider them valid by meeting the network rules, the process starts again, and miners try to solve the next block and add it to the chain. Solving a block requires a large amount of energy; in this way, proof-of-work blockchains effectively use expended energy (work) to secure the blockchain from tampering. This approach is why the larger the network supporting a blockchain is, the harder it is to attack it if you wish to attempt a double spend or otherwise manipulate the on-chain data.

Use Cases for Blockchain

The immutable nature of blockchains has many potential uses for storing data prone to tampering, managing transactions, tracking ownership, and much more.

The ability to prove ownership using a blockchain has led to not just the ability to transact with a censorship-resistant form of sound money. Still, it’s also opened up a vast range of potential from the medical field to the most niche areas of finance. When you take the power of a traditional database but add decentralization and immutability, this opens up many doors. With blockchains allowing you to send millions of dollars in value across the world in moments for comparatively minuscule fees using bitcoin, being able to own an NFT, or engage in the world DeFi (decentralized finance) using ethereum, there’s so much to love about blockchains, and the use cases for them only seem to be expanding with time.

Bitcoin made blockchain a term that is bursting into the scope of the mainstream, yet we’re only seeing the tip of the potential for this new technology. Understanding the basics of blockchain is a great way to get started on your journey to learn more about bitcoin and other cryptocurrencies; check out some of our other articles to learn more!

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