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The Technology Behind Blockchain

The Blockchain technology has seen widespread adoption and praise, but it has also received the reputation for being complicated or difficult to understand. On the contrary, Blockchain technology is not as complicated to understand as it seems. This article will provide a definition of the Blockchain technology, and also an example of how this technology works.

The Blockchain is an appendable, immutable, universally distributed open ledger. That definition may sound complicated, however, when further defined, the Blockchain becomes easier to understand. Even without prior knowledge of the Blockchain technology and only an understanding of the component parts of the Blockchain, anyone can understand the secret behind the Blockchain Technology. The table below provides definitions for the fundamental components of the Blockchain technology:


First, the Blockchain must be immutable. This means that nothing can be deleted from the open ledger. The Blockchain must also be appendable. For instance, records can always be added to the open ledger. The Blockchain technology allows an open ledger to grow while also ensuring records cannot be deleted. In addition, the Blockchain must be universally distributed so everyone can review the ledger and can monitor transactions made using the Blockchain technology. Finally, the Blockchain must also provide a digital open ledger that records transactions chronologically and publicly.

To help facilitate understanding of how fundamental components of the Blockchain work together, consider the following example. Let’s imagine you live on the planet X with four other people. On this planet, there is one coffee shop that uses the Blockchain technology to track transactions. All four people who interact with the Blockchain on planet X have access to the open ledger since it is universally distributed. Because the Blockchain technology is both immutable and appendable, those who use the Blockchain on planet X are assured that transactions can be added and that no transaction can be deleted.

Now, to understand how a transaction works on the Blockchain, imagine all four people are in the coffee shop on planet X. For simplicity, let`s imagine the four people on planet X are named A, B, C and D. The shop owner D must choose how much to charge for a coffee. The three customers A, B and C must decide if they want to pay for the coffee. For instance, if customer A decides to buy a coffee from the owner D by using the Blockchain technology, a transaction on the open ledger will be recorded for A, B, C and D and can be examined later.

Assume that A buys a coffee from D for three credits. In this situation, A would create a message stating three credits were exchanged and then attach D’s public key and sign it with their private key. Further, hashing would be used during the transaction between A and D, making it impossible to create another block within the Blockchain that uses the same hash. This will inform B and C that D is the owner of three additional credits, while also protecting A from malicious transaction tampering from D. Because the Blockchain relies on hashing, if D tries to raise the cost of coffee after the transaction to four credits, the hash will also change. Since A, B, C and D all have access to the open ledger, when D attempts to raise the price of coffee to four credits, validation issues will occur on the Blockchain. Since every block in the Blockchain ensures integrity by referencing the hash of the previous block, when D attempts to raise the price, the Blockchain will fail to validate the transaction of four credits and the ledger will resort back to its last state where the hashes between the blocks on the Blockchain were matching. In this situation, the initial transaction between A and D would be honored at three credits since that transaction data was relied upon and verified by the Blockchain.


This example shows how hashing is a critical component of the Blockchain technology. When A and D first made a transaction at three credits, a one-way hash that represents the transaction was generated. This hash is sixty-four characters long and changes unpredictably if any aspect of the information used to generate it is changed. Below is an example of hashing that the Blockchain technology uses:


Based on the example, if D changes the input from three to a four, the hash will change completely. This means that if D attempts to change the price from three to four credits, the hash that has already been introduced to the Blockchain will also change. However, this will not work since the ledger is open and universally distributed. Thus, A, B and, C will have matching open ledgers while D would have a ledger that does not match. The Blockchain technology through long-chain validation would only accept the original transaction.

Long-chain validation works within the Blockchain technology by always ensuring the longest existing validated chain which is being used. For instance, the Blockchain technology references the hash of the previous block for every newly generated block. In the example on planet X, once the hash was changed by D, a fork would occur on the Blockchain.

However, long-chain validation would determine that only the first transaction for three credits could be validated because blocks made after the three credit transaction would have referenced the unique hash created during the original three credit coffee purchase. Once D edits the original transaction data, the unique hash for that block within the Blockchain would change. However, the Blockchain technology would simply rely on its block to block validation structure to determine if the transaction for three units is valid, and a part of the longest validated chain of blocks on the Blockchain. The Blockchain technology allows you to trust someone without knowing them.

Blockchain technology used in financial services and healthcare industries

Due to the secure open ledger that the Blockchain technology provides, it is no surprise that both the financial services and healthcare industries have started using it. As many other industries, the financial services industry has adopted the Blockchain technology primarily as a way to promote efficiency and enhance existing operations. However, partially due to the popularity of cryptocurrencies like Bitcoin, many businesses in the financial services industry have been adopting the Blockchain technology to provide entirely new, creative revenue streams. By using the Blockchain technology, the healthcare industry has achieved to effectively manage clinical trial data and electronic medical records. Through its secure open ledger structure, the Blockchain technology provides a method of ensuring regulatory compliance and patient data security to those within the healthcare industry.

The Blockchain technology is important and exciting because it provides an appendable, immutable, universally distributed open ledger. Although the example used is simplified to make the Blockchain technology easy to understand, the Blockchain technology is not complicated. The Blockchain will continue to increase in popularity since it is fundamentally sound and can be used in any situation where transaction integrity is desired.

Interested to know more about Blockchain Technology? Access the recorded session of the webinar about “The Secret behind the Blockchain Technology” here.

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