Beginners Guide to Blockchain Technology – Part I

I find people use the term ‘Blockchain technology’ to mean different things (i.e Bitcoin/altcoin blockchain, smart contracts etc) which can sometimes be confusing. Most of the time they are talking about is a distributed ledger. Considering Blockchain technology is disrupting industries from voting to banking, having a basic knowledge of it will be useful. Therefore this post is first in the series of posts explaining what is Blockchain technology.

The Blockchain is a digital ledger for storing data and the most famous implementation of this technology is the cryptocurrency called Bitcoin. This post will focus on two basic terms used in Blockchain technology, namely transactions and blocks.

Before we talk about the terms, let’s take a detour and talk about carriage trains. At this point you might be wondering, what has carriage train got to do with Blockchain. Well it has got nothing to do with Blockchain but it is a metaphor for explaining what transactions and blocks are to Blockchain technology.

At its core, the passenger train has two components, namely locomotive (engine) and carriage/coach.  All the components are connected via a coupler and there are different types of couples such as Buffer & chain, Link & pin and Bell-and-hook coupler.  In part II, I will explain how coupler fits into the picture and what concept in Blockchain is similar to the coupler.

The carriage is normally of fixed size and has a limit of how many passengers it can accommodate. To get on the carriage, the passengers have to buy a ticket and the ticket will generally have information regarding what time the train departs, platform number and carriage number. If there are any seats available then they will get a confirmation and they can board the train else they have to go on a waiting list/wait for next train.

This same principle applies to Transactions and Blocks. So if we go back to Blockchain, the transaction is similar to the passenger. However, a transaction can also be something else, just like different types of trains such as freight train and passenger trains. Similarly, the transaction can be a payment or medical record. Therefore Blockchain transaction can be defined as a small unit of task that is stored in records. Generally, there are two types of transactions, confirmed and unconfirmed. Confirmed transactions go into the blocks whereas unconfirmed don’t. This is similar to getting a confirmed ticket to board the train else you have to be on the waiting list.

The block in Blockchain technology is similar to carriage in a train. Basically block is a record of confirmed transactions and different types of Blockchain implementations will have a maximum size for a block. For example, the Bitcoin block has a maximum size of 1MB. Each new block will have a reference to the previous block in the blockchain except for the first block. Like in the train we have an engine, the first block in Blockchain is called Genesis block.

The following picture depicts transactions & blocks in the Blockchain. The block data is where the transactions reside. In Part II, I will explain how hashing is used to connect blocks.

If you want to learn more about Blockchain, you can read my ebook “Introduction To Blockchain“.

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