Blockchain explained in simple terms

Blockchain is a really cool technology that makes it almost impossible for anyone to hack into and change information once it’s been recorded.

Think of it like a super-secure notebook that someone writes in with a special pen that can never be erased or changed. Once something is written down, it’s there forever and nobody can change it without everyone knowing.

This kind of technology is really useful for things like digital money, also known as cryptocurrencies, because it allows people to transfer money to each other without needing to trust a middleman like a bank.

Before blockchain, there was a big problem with digital money called the “Double Spend Problem”. It was like if you made a copy of your favourite song on your computer and then tried to sell it to someone else. You still have the original copy, so you could keep selling it over and over again! That’s obviously not fair, and it’s why digital money wasn’t very popular before blockchain came along.

But with blockchain, people can be sure that if they send someone digital money, nobody else can also spend that same money. This has opened up a whole new world of possibilities for online transactions and smart contracts, which are like digital agreements that can be automatically enforced without needing to trust anyone else.

The mystery in history

Many people had ideas to solve the Double Spend Problem, but none were clear until November 2008. A white paper called “Bitcoin: A Peer-to-Peer Electronic Cash System” was shared on a cryptography discussion group by someone claiming to be ‘Satoshi Nakamoto’. This paper suggested using a global, almost unbreakable ledger (or database that can only be written to once) to record every transaction forever. The true identity of Satoshi Nakamoto is still a mystery.

The inside story

This ledger is made of blocks (like pages) which can hold a set of data ( transactions ) and will be cryptographically sealed once filled. The next block will contain the next set of data and will also include a hashed signature of the previous block and so on. This ensures that if any change is made to a block (other than the latest), it will require the modifier to re-encrypt all the following blocks as the hash signature of the modified block will be changed on modification. To make this more difficult, there is a concept of nonce number that is added to each block to make the hash signature fall to a specific pattern (like first 8 characters must be Zero). This nonce number need to be found by putting its value from 0 to infinity until the hash signature that falls to the specified pattern is found. This is called mining.

How is the double spend problem addressed?

We really don’t want a pure file transfer where only one copy of the file exist. We only need to have the ownership of the asset (file) to be transferred. With blockchain in place, we will record the ownership of the asset as transferred from one entity to another in a block of the blockchain. There is no roll-back or duplication possible. Thus we make sure that the ownership of asset is in existence only once. The asset here can be anything from file, contracts, diamonds, cars, real estate, shares or anything that has a value.


Its potential is opening new horizons in internet based transactions. The biggest of them currently are mentioned below.

Cryptocurrency: These are more like shares in stock exchange. The volume of coins are limited. So if the demand increase, so does its value. It has no backing with physical entity like gold. In this context, the normal currencies (like USD or Pound) and referred as fiat currencies.

If you have only heard of Bitcoin, you need to visit CoinCap website. It lists almost 850+ currencies in existence along with their values. There are believed to be much more in the dark web. [Bit coin image source: REUTERS/Benoit Tessier]

Smart Contracts: These are records that are added to blocks about any contractual agreements.


We now have a solution to the double expenditure problem. This fundamental notion has been investigated and expanded over the last eight years, resulting in more efficient chain technologies under the Hyperledger project and many others. Leading audit consultancies and technology pioneers are researching their applicability and possibilities.

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