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Learn > Web3 101

What is blockchain?

Muhammad Ahmed
Muhammad Ahmed
23 May 2023 · 5 min


Blockchain technology, the backbone of cryptocurrencies like Bitcoin and Ethereum, has captured the attention of industries and individuals alike. But what exactly is a blockchain, and how does it work?

This article will serve as an introductory guide to blockchain technology and will take a look at some of its key applications on Bitcoin, Ethereum and Arweave.

How blockchains work

A blockchain is a decentralized, digital ledger that records transactions in a transparent, secure and tamper-proof manner. It consists of a series of blocks that contain transaction data, and each block is connected to the one before it, forming a chain.

Whenever a transaction takes place on a network, such as transferring Bitcoin, executing an Ethereum smart contract, or storing a file on Arweave, it needs to be validated by nodes within the network. Nodes are responsible for verifying the transaction details, and once approved the transaction is added to a block.

Once a block has been verified, it is added to the blockchain, containing a unique identifier or hash, the hash of the previous block and its list of transactions. The security of a blockchain is ensured through a process called consensus, in which multiple independent nodes agree on the validity of information. 

This eliminates the need to rely on a central authority, making the blockchain resistant to tampering and fraudulent activity. Such a structure ensures security and verifiability, as altering a block would change its hash and break the chain’s validity.

Blockchains are decentralized

When data is stored in a central server or a few servers controlled by a single entity, the data is at risk of being altered. A blockchain stores data across different nodes in various regions, making it increasingly difficult to alter it. Such a decentralized distribution not only ensures redundancy, but also immutability.

For instance, should a node attempt to manipulate a record, the other nodes in the network would be able to identify this discrepancy and prevent it from taking place. As a result, no single node has the ability to unilaterally modify information stored within a blockchain network.

Blockchains are transparent

Every transaction on a blockchain is visible to all participants in the network, making the system radically transparent. Anyone can access transactions by either running a node or viewing transactions through a blockchain explorer.

Info icon Blockchain Explorer

A blockchain explorer is a software that is used for visualizing blocks, transactions and other network metrics such as transaction fees, hashrates, block size, block difficulty and the like.

If you’d like to familiarize yourself with block explorers, you can visit some of the well known ones such as Blockchair, Etherscan, Viewblock.

This openness can build trust among participants, as all actions are traceable and visible. Additionally, as these transactions are encrypted, only the individual who owns the address can reveal their identity. As a result, blockchain technology presents a unique opportunity where user anonymity and transparency are able to coexist.

Blockchains are secure

Advanced cryptographic techniques are used to secure data on blockchains. Every block in a blockchain is linked to the previous one via a cryptographic hash, a unique string of characters that represents the data within the block. This means that if any information in a block is altered, the hash will change, making the blockchain invalid.

If an attacker were to attempt to alter the information in a block, they would need to carry out a 51% attack. In a 51% attack, they would have to make this change in more than half of the nodes across the network due to the consensus mechanism which secures a blockchain. Given the vast size of well-established networks like Bitcoin and Ethereum, such a feat is practically impossible to achieve.

Blockchains are a catalyst for trust

Trust is a fragile thing – difficult to build, easy to break.

Centralized systems often rely on a single authority, which can become a single-point-of-failure or an abuse of power. Blockchains offer a promising solution by removing the need for a middleman, establishing trust through mathematical algorithms and consensus protocols.

This shift reduces the potential for fraud, corruption, or human error. In a blockchain, trust is encoded into the system itself. This has profound implications for various sectors, from supply chain management, data ownership, and beyond.

When it comes to data ownership, blockchains offer a unique opportunity to truly own your data. The immutable nature of a blockchain means that once your data is stored on chain, it cannot be modified or deleted. You are able to decide who can access your information and for what purpose.

We have elected to put our money and faith in a mathematical framework that is free of politics and human error.

Tyler Winklevoss, Founder, Gemini Cryptocurrency Exchange

Popular blockchains

Bitcoin: the pioneer of blockchain

Bitcoin is the first and most well-known blockchain platform, created by an anonymous person or group under the pseudonym Satoshi Nakamoto in 2008. The primary function of this blockchain is to facilitate peer-to-peer transactions of Bitcoin (BTC).

The platform's decentralized nature eliminates the need for a central authority like banks or governments, allowing users to transact directly with one another. The security of the Bitcoin network is maintained through a consensus mechanism called Proof of Work, where miners compete to solve complex mathematical problems, and the first to solve it adds the next block to the chain. In return, they are rewarded with newly minted bitcoins.

As Bitcoin became widely adopted as a store of value, this laid the foundation for the development of other blockchain platforms.

Ethereum: a platform for decentralized applications

Ethereum, launched in 2015 by Vitalik Buterin and a group of developers, expanded upon the concept of blockchain by introducing the ability to create and deploy decentralized applications (dApps) and smart contracts.

A smart contract is a self-executing contract with the terms of the agreement directly written into code. These contracts automatically enforce the agreement and can eliminate the need for intermediaries, thus reducing the risk of fraud or delays.

Ethereum uses its native cryptocurrency, Ether (ETH), to facilitate transactions and incentivize miners to maintain the network. Ethereum's versatility has allowed for a wide range of applications, from decentralized finance (DeFi) and non-fungible tokens (NFTs) to voting systems and supply chain management solutions.

Arweave: permanent data storage and archiving

Arweave, founded by Sam Williams in 2017, is a blockchain-based platform specifically designed for permanent data storage and archiving. Unlike Bitcoin and Ethereum, which primarily focus on transactions and smart contracts, Arweave's mission is to create an "uncensorable, permanent web" that ensures the availability of data and documents forever.

To achieve this, Arweave employs a unique consensus mechanism called Succinct Proofs of Random Access (SPoRA). This incentivizes miners to maintain a copy of the entire blockchain and encourages them to retrieve data quickly by rewarding them with its native cryptocurrency, AR.

This ensures that data stored on the Arweave network remains accessible and safe from tampering, making it a valuable tool for the public sector in preserving essential records, historical data, and other critical information.


Blockchain technology, with its decentralized, transparent and secure nature has the ability to disrupt various sectors. These examples illustrate just a fraction of the countless potential uses for blockchain technology.

The potential applications, however, are yet to be fully realized. Whether it's streamlining carbon trading, transforming voting systems, storing healthcare records, or enhancing government expenditure transparency, the use cases are boundless. 

We have just scratched the surface.

Learn more

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