If you’re just getting into blockchain, start here. I’ll explain what it actually is and how it works using examples that make sense.
The Trust Problem
Imagine you and your 4 friends — Ravi, Priya, Aman, and Sneha — share expenses on a trip. Someone needs to keep track of who paid what. Normally you’d trust one person to maintain the spreadsheet. But what if that person edits it to show they paid more than they did?
Blockchain solves this by giving everyone a copy of the spreadsheet. Every time someone adds an entry, all 4 others verify it. If Ravi tries to write “I paid 5000” when he actually paid 500, the others will reject it because their records don’t match. No single person controls the data.
That’s the core idea. A blockchain is a shared ledger that nobody owns but everyone can verify.
graph LR A[Ravi adds entry] --> B[Priya verifies âś“] A --> C[Aman verifies âś“] A --> D[Sneha verifies âś“] A --> E[You verify âś“] B & C & D & E --> F[Entry accepted âś…]
What is a Block?
Each “page” in this shared spreadsheet is called a block. A block holds a bunch of transactions — like “Ravi paid ₹500 for dinner”, “Priya paid ₹300 for auto”, etc.
Once a page is full, it gets sealed and a new page starts. But here’s the key — each new page contains a reference (hash) to the previous page. So if someone tries to go back and change page 5, it would break the reference on page 6, which would break page 7, and so on. You’d have to rewrite the entire notebook from that point. And everyone else has their own copy, so they’d immediately notice.
graph LR B1["Block 1<br/>đź”— Genesis"] --> B2["Block 2<br/>đź”— Hash of Block 1"] B2 --> B3["Block 3<br/>đź”— Hash of Block 2"] B3 --> B4["Block 4<br/>đź”— Hash of Block 3"] style B1 fill:#e8f5e9 style B4 fill:#e3f2fd
This chain of blocks is the blockchain. Tamper with any block and you break every block after it. That’s what makes it secure.
What is Decentralization?
You’ll hear this word everywhere in blockchain. It just means: no single person or company is in charge.
Think about how things normally work:
graph TD subgraph centralized["Centralized (how most things work)"] Bank["🏦 Bank"] --> U1["You"] Bank --> U2["Priya"] Bank --> U3["Aman"] Bank --> U4["Sneha"] end subgraph decentralized["Decentralized (blockchain)"] U5["You"] --- U6["Priya"] U6 --- U7["Aman"] U7 --- U8["Sneha"] U8 --- U5 U5 --- U7 U6 --- U8 end
Centralized: One entity controls everything. Your bank can freeze your account, block your transactions, or go bankrupt and lose your money. You trust them because you have to.
Decentralized: No single entity has control. Thousands of independent computers (nodes) around the world all run the same software, hold the same data, and follow the same rules. No one can freeze your account because no one owns the network. To shut it down, you’d have to shut down every node simultaneously — scattered across dozens of countries.
Why it matters: Centralized systems have a single point of failure. If the bank’s servers go down, nobody can transact. If the CEO decides to be shady, customers are affected. Decentralized systems don’t have this problem — if some nodes go down, the rest keep running. If some nodes try to cheat, the majority rejects them.
The tradeoff: decentralized systems are slower and harder to build. But for things involving money and trust, the resilience is worth it.
What is Consensus?
But how do all these people agree that an entry is valid? That’s consensus — the rules everyone follows to decide what’s real and what’s fake.
In the friend group, the rule might be simple: “majority wins.” If 3 out of 4 people say the entry looks correct, it gets added.
In blockchain, consensus mechanisms are the same idea but with thousands of computers (called nodes) instead of friends. Each node is just a computer running the blockchain software and holding a copy of the entire ledger.
The two most popular consensus mechanisms are:
- proof-of-work — miners compete by solving puzzles. Used by Bitcoin.
- proof-of-stake — validators put up money as collateral. Used by Ethereum.
Quick Comparison
graph LR subgraph PoW["Proof of Work ⛏️"] A1[Miners compete] --> A2[Solve puzzle] --> A3[Winner adds block] end subgraph PoS["Proof of Stake 🪙"] B1[Validators stake coins] --> B2[Random selection] --> B3[Selected adds block] end
| Proof of Work | Proof of Stake | |
|---|---|---|
| Who validates? | Miners with computing power | Validators with staked coins |
| Security from | Energy cost to attack | Financial cost to attack |
| Energy usage | Massive | Minimal |
| Risk | 51% attack (need huge hashpower) | Centralization (whales dominate) |
| Example | Bitcoin | Ethereum (post-merge) |
Read the dedicated pages for proof-of-work and proof-of-stake to understand how each actually works.
Key Terms
Quick reference for terms that come up throughout this whole blockchain series:
| Term | What it means |
|---|---|
| Node | A computer running the blockchain software. Think of each friend in the group who has a copy of the spreadsheet — each of them is a “node” |
| Block | A bundle of transactions grouped together. Like one page in the spreadsheet |
| Blockchain | Blocks linked together in order, each referencing the previous one. The full history of every transaction ever |
| Hash | A digital fingerprint. Feed any data into a hash function and you get a fixed-length string. Change even one character and the output completely changes. Used to verify data hasn’t been tampered with |
| Nonce | ”Number used once” — the random number miners guess to solve the PoW puzzle |
| Mining | The process of competing to solve the puzzle and add a block (PoW only) |
| Validator | Someone who stakes coins and validates transactions (PoS). The PoS equivalent of a miner |
| Staking | Locking up your coins as collateral to participate as a validator |
| Slashing | Penalty for dishonest validators — they lose part of their staked coins |
| Gas | The fee you pay to use the network. Like postage for your transaction. Higher traffic = higher gas fees |
| Wallet | Software that stores your private keys and lets you send/receive crypto. The coins themselves live on the blockchain, not in the wallet |
| Private key | A secret password that proves you own your coins. Lose it and you lose access forever. There’s no “forgot password” button |
| 51% attack | If someone controls more than half the network’s mining power or stake, they could theoretically cheat. Extremely expensive on major networks |
| Decentralized | No single entity controls it. Power is spread across many independent participants |
| Off-chain | Anything happening outside the blockchain — real-world data, computations on other systems, etc. |
| Smart contract | Code deployed on the blockchain that runs automatically when conditions are met. Covered in detail in the next post |
| DeFi | Decentralized Finance — financial services (lending, trading, insurance) built on smart contracts instead of banks |
What’s Next?
Now that you know how the network agrees on things, the next question is — what can you actually DO on a blockchain beyond sending money? That’s where smart contracts come in.