When Bitcoin was introduced in 2009, it was essentially worthless. You couldn’t technically buy anything with it, and people were unsure if it would ever catch on. Fast forward to 2011, and the price per Bitcoin had finally climbed past $1 — making slow, steady progress. By November 2012, Bitcoin hit a significant milestone: it crossed the $1,000 mark (per Bitcoin). And now, in 2024, we’re looking at Bitcoin sitting comfortably over $90,000.

With the rise of Bitcoin and the popularity of other digital currencies, you’ve probably heard one particular term a lot by now — blockchain. But what exactly is blockchain? Everyone talks about it, but a lot of people (including those who invest in cryptocurrency) still don’t really understand what it does or why it matters. The truth is, while not every digital currency technically needs a blockchain to exist, Bitcoin depends on it. Without blockchain, Bitcoin wouldn’t be what it is today.

So, let’s take a step back and dive into what makes blockchain tick. Don’t worry — I’m going to keep it simple and (hopefully) super clear! Blockchain isn’t some complex concept meant for only tech experts. It’s a system that lets digital currencies function in a secure, transparent, and decentralized way. And once you understand how it works, you’ll see why it’s such a big deal — not just for Bitcoin, but if I’m being honest, for the entire world.

Alright, let’s roll up our sleeves and get into the magic behind the madness. Here’s your crash course in blockchain. We’ll cover what it is, how it works, and exactly how it’s revolutionizing industries like finance, healthcare, and more.

Table of Contents

• What is Blockchain?
• Why is Blockchain Important?
• Key Elements of Blockchain Technology
• How Does Blockchain Work?
• The Pros and Cons of Blockchain Technology
• Types of Blockchain Networks
• Blockchain Applications and Use Cases
• Breaking Into Blockchain

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What is Blockchain?

On the most basic level, blockchain is a decentralized system for securely recording transactions. Think of it as a digital ledger shared across a network of computers (or nodes). Instead of relying on one institution (like a bank or government) to record transactions, blockchain uses these nodes to validate and store the data. Each time a transaction occurs, it’s grouped into a block. Once the block is verified by the network, it’s linked to the previous one, creating a chain of data or transactions — et voila, the name blockchain.

This makes blockchain incredibly secure because it’s nearly impossible to alter past transactions. Changing one block means changing every block that comes after it — across all computers/nodes in the network. And this isn’t something that can be done in secret either. Everyone involved can see the records, so theoretically no one person or system can change them without consensus. With blockchain, there isn’t one person or institution controlling the system. Instead, everyone has to have skin in the game, which, in an ideal system with good actors, makes it generally easier to trust and track anything, from financial transactions to supply chain data — but more on that later!

Why is Blockchain Important?

Blockchain is making waves because it tackles some of the biggest challenges in today’s digital world — security, transparency, and trust. In industries like finance and healthcare, companies are constantly dealing with the threat of data breaches and various other kinds of cyberattacks. Blockchain is decentralized by design, and it makes sure that data is securely encrypted and transparent, which makes it extremely hard for anyone — especially bad actors (read: cybercriminals and blackhat hackers) — to tamper with. With the massive rise of cryptocurrencies (like Bitcoin) and non-fungible tokens (NFTs), blockchain is transforming how we secure, share, and manage data, which makes managing these digital assets a lot easier.

Contrary to popular belief, blockchain and bitcoin are not the same thing, but they’re closely related. Blockchain is the underlying technology that securely records transactions while Bitcoin is a type of digital currency that uses blockchain to operate. Think of blockchain as the operating system and Bitcoin as one of the applications running on it.

Note: Blockchain isn’t impervious to scams and cheats, but the data is a lot more secure inside of the system itself.

Key Elements of Blockchain Technology

There are a few elements that make blockchain, well, the blockchain. These include:

Decentralization

Decentralization is one of the biggest features of blockchain technology. This means no single entity has control over the system. Instead of relying on one central authority, blockchain uses distributed ledgers. These are copies of the same database stored across many computers (nodes). Every time a transaction happens, it’s recorded on all of these nodes which makes it nearly impossible to alter or hack after the fact. This way, trust is built not on one party, but on a network of independent participants working together. It’s like everyone sharing the same notebook so everyone has the same info and no one can cheat.

Immutable Records

In blockchain, once a transaction is added to the chain, it’s immutable, aka permanent and can’t be changed. There are upsides and downsides to this of course. If you make a mistake — say, you send money to the wrong address — that transaction can’t be undone. It’s like sending a letter and realizing you wrote the wrong address after you’ve dropped it in the mail slot. The record stays, and there’s no way to “erase” it. While you can still ‘fix’ mistakes by making a new transaction to correct the error, the original one is still there, forever, for anyone to see. It’s this permanent record that gives blockchain an element of being more secure and trustworthy than traditional digital recordkeeping.

Smart Contracts

No middleman? No problem! Smart contracts are basically self-executing agreements that live right on the blockchain. Think of them like automated instructions: once the conditions of the contract are met, the contract just runs itself.

Imagine you’re buying a car. You and the seller agree that once payment is made, the car’s ownership paperwork will transfer to you. The smart contract is programmed to check when the payment is made, and as soon as it’s confirmed, ownership switches hands — automatically, and importantly, with no bank or lawyer required. These contracts make transactions faster, cheaper, and more secure because they run exactly as programmed, without human intervention (other than initial setup). And because people aren’t involved, you don’t have to worry about human error, or those annoying delays that come with waiting 5-7 business days.

Public Key Cryptography

Public key cryptography is the system used to secure transactions on the blockchain. Each user has a pair of keys: a public key (like an address) and a private key (like a password). You share your public key with others so they can send you assets, but only you, with your private key, can access or spend them. It’s a way to make sure that transactions are secure and that only the rightful owner can control their assets. So, if you’re receiving Bitcoin, people can send it to your public key, but only you can unlock it with your private key.

Note: It’s still a good idea to keep your public address relatively private or anyone could drop anything (including malware) into your digital ‘wallet’.

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How Does Blockchain Work?

Now that you’ve got a handle on the key elements of blockchain, let’s take a look at how it all comes together. You probably already know that blockchain can get technical — especially when you dive into the details — or you wouldn’t be reading this article, but the basic process is pretty straightforward. It’s a way to securely record transactions on a shared, digital ledger where each new piece of data is linked to the one before it. Here’s how it works:

1. Initiate a transaction. The process starts when someone initiates a transaction. This happens when you send something — like cryptocurrency, a contract, or data — to someone else. During a transaction, information like the amount, sender, receiver, and timestamp is recorded.
2. Broadcast the transaction to the network. Once you initiate a transaction, it’s broadcast to the blockchain network. This means the transaction is shared with all the computers (or “nodes”) in the system. They all receive the details, making sure everyone knows about the transaction and is ready to verify it.
3. Verify the transaction. After broadcasting, the network’s nodes verify the transaction. They check if everything is correct — like confirming the sender has enough funds or that the details match the rules. If everything checks out, the transaction is approved.
4. Add the transaction to the block. The transaction is bundled with others into a “block” — essentially a batch of transactions. The block acts like a page in a ledger or record book. When enough transactions fill up a block, it can be linked.
5. Add the block to the existing chain. After the block is filled, it’s added to the blockchain and linked to the previous block. This creates a virtually (pun intended) unbreakable chain as every new block strengthens the chain and makes it more secure.
6. Update all nodes across the network. All the nodes in the network update their copies of the blockchain. This makes sure everyone has the same, up-to-date version of the data so everyone is on the same page in real time. If you were wondering why graphics cards got more expensive in the last few years, this is it!

The Pros and Cons of Blockchain Technology

Blockchain is changing the game in many industries, and it’s easy to see why. It brings some serious benefits to the table, like improving transparency, boosting security, and lowering costs. But of course, like any new technology, it’s not without its challenges. There are trade-offs, and some of the drawbacks are absolutely worth considering as a part of risk-assessment.

However, despite these challenges, blockchain is still making a big impact. Just look at how companies like Walmart are using blockchain to simplify supply chain processes as they trace products like lettuce from production farms to store shelves. Even with its hurdles, blockchain is clearly driving change in ways that matter, but we’d be remiss if we didn’t talk some more about these challenges.

Con: Ownership
With blockchain, once you control something (like cryptocurrency or a token), you are fully responsible for it. Your private keys are like the password to your digital wallet or assets, but if you forget or lose them, there’s no way to retrieve your funds. There are many cryptocurrency horror stories about people misplacing the USB with their private key and subsequently losing their entire portfolio, so take steps to have secure alternatives when possible.

Pro: Tamper-proof
Once data is recorded on a blockchain, it’s almost impossible to change it. Imagine a bad actor trying to change a transaction after it’s been confirmed — the whole network would immediately flag it as suspicious.

Con: Data modifications
Storing large amounts of data on a blockchain can be a logistical nightmare. While it’s great for verifying transactions, using it for things like massive databases isn’t practical since data on the blockchain is immutable and can’t be easily edited or deleted. The data becomes exponentially larger — and harder to modify — with each additional transaction.

Pro: Speedy transactions
Blockchain cuts out middlemen (like banks and other third parties) which makes transactions contextually faster and more direct. Sending money or transferring assets can happen in minutes instead of days.

Con: Infrastructure challenges
Building a blockchain system — or even integrating it into an existing system — can be technically challenging and expensive. It’s not something businesses can just plug into without significant planning and investment.

Pro: Built to last
The decentralization of blockchain means it doesn’t have a single point of failure. So even if part of the system goes down, the rest keeps running — making it way more reliable than traditional systems.

Con: Storage issues
As more transactions and data are added, the blockchain gets bigger and bigger over time. Storing all that data can become a challenge, especially when companies are operating at scale and ledgers become too big for users to download.

Pro: Trustworthy
You don’t need to trust any single party when using blockchain. The system itself means the participants are accountable to each other, which helps ensure everyone is playing by the rules.

Con: Security vulnerabilities
While blockchain is considered secure, other parts of the ecosystem (like wallets or exchanges) are not immune to hacks. Blockchain users still need to be vigilant about where and how they store their assets.

Pro: Lower costs
By cutting out middlemen and automating processes (like verifying transactions), blockchain can help reduce fees and operating costs. Think about how much cheaper international payments become without using traditional banks?!

Types of Blockchain Networks

There are four main types of blockchain networks: public, private, consortium, and hybrid. Each one has its own unique way of handling access, control, and transparency, based on what’s needed for a specific situation. If you’ve ever dealt with cloud computing, some of these ideas might sound familiar, and that’s because they are! Blockchain and cloud computing share a similar goal — both are about securely managing and sharing resources, they just go about it in different ways. And like cloud computing, whether you’re trying to control who gets to see your data or keep things completely open for everyone to use, there’s a blockchain type for every need.

It’s all about understanding how much access and privacy you want, and how you want control to work. And once you’ve got that figured out, you can choose the right blockchain for your purpose.

Public Blockchain Networks

A public blockchain is open to everyone, meaning anyone can join, participate, and see all transactions. It’s fully decentralized, so no single party has control. Ethereum is a common example, but like most, you’re probably more familiar with Bitcoin, where anyone can send or receive transactions without needing permission. And while these are two of the most well-known examples, many public blockchains follow this open and transparent approach.

Private Blockchain Networks

Private blockchains are more like gated communities. They’re restricted to a specific group of users, usually within a company or organization. Only authorized participants can access and validate the transactions on the network, so it’s much more controlled. A good example is Hyperledger Fabric, which businesses use to manage their own secure internal blockchain networks. They use open source blockchains like Hyperledger Fabric for things like internal supply chain management, where privacy and control are key.

Consortium Blockchain Networks

A consortium blockchain is a bit of a mix — it’s not run by a single organization, but instead, it’s shared and controlled by a group of organizations. This setup is great for industries like banking, where multiple companies need to collaborate on the same network but want to keep things more private and secure than what you’d find on a public blockchain.

Hybrid Blockchain Networks

Hybrid blockchain networks, as you might imagine, combine features of both public and private blockchains. This allows certain information to be publicly accessible while keeping more sensitive data under wraps. Dragonchain is a great example — it lets a business keep private data secure but still interact with the public blockchain when they need to ensure transparency. This kind of setup can give you the best of both worlds: privacy when needed and transparency when it’s important.

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Blockchain Applications and Use Cases

Blockchain is changing the way banks handle money, and frankly, it’s a pretty big deal. By cutting out the middleman, it makes financial transactions faster, safer, and more efficient. Banks use blockchain for international payments, fraud prevention, and transparent trading. Santander, for example, uses Ripple to make real-time international payments, with lower fees and much more security. The best part? Blockchain helps eliminate the delays and high costs that come with traditional banking systems. It’s a smart move for the future of finance, and it’s already taking over the present.

In healthcare, blockchain is improving data security, patient privacy, and the sharing of medical records. It allows health data to be stored securely and transparently, giving only properly authorized people the ability to access and update it. Companies like Chronicled are using blockchain to track the authenticity of pharmaceuticals. This helps make sure that drugs are genuine and safe, reducing the risk of counterfeit medications reaching the masses. Blockchain is making healthcare systems more reliable and trustworthy, one medical record — and medication — at a time.

In the same vein as tracking pharmaceutical drugs, blockchain is having a huge impact on supply chains by making it easier to track products every step of the way — from production to delivery. It helps guarantee that products are what they say they are and makes the whole process run more smoothly. One of the most talked-about examples (that we referenced earlier) is Walmart and how it uses blockchain to track the journey of its food products. This makes it a lot easier to trace contamination sources and ensure faster, more accurate recalls when needed.

Real estate companies are using blockchain to streamline property transactions, making them faster, more transparent, and more secure. Again, blockchain helps eliminate the need for middlemen — in this case brokers and notaries — which reduces costs and potential errors. RealT uses blockchain to divide properties into tiny digital pieces, called tokens. Think of these tokens like company shares — you can buy them just like stock. Blockchain keeps track of who owns what, making it easy to buy, sell, or trade these property tokens. By breaking down ownership into smaller, tokenized prices, RealT makes real estate investment more accessible to just about anyone.

How can businesses be sure that their ads are reaching real people? Blockchain is changing media and advertising by improving transparency and cutting down on fraud. It allows advertisers to track their spending and confirm that ads are being shown to real users, not bots. Verasity uses blockchain to create a more efficient advertising system where viewers are rewarded with cryptocurrency for watching ads, while advertisers only pay for genuine, engaged views. This setup eliminates middlemen and builds trust for the advertisers in their viewers and engagement.

You’ve probably heard of Liberty Mutual, but did you know they’re exploring blockchain and how it can make insurance better? By speeding up claims processing, blockchain is helping insurance companies like Liberty Mutual streamline the whole process. For example, it can automatically trigger payouts when certain conditions are met. Not only does this help eliminate delays, but it also helps reduce paperwork and create a more trustworthy process for both insurers and customers.

But that’s not all! Blockchain is positively affecting tons of industries and is being integrated into everything from government operations and oil and gas to retail, telecommunications, manufacturing, and more. For a lot of companies, the message is clear: figure out how to use blockchain or risk getting left behind!

Breaking into Blockchain

If you’re excited about getting into blockchain technology, you’re in the right place. With the increasing popularity of digital currencies, companies are scrambling to find skilled blockchain developers. So, now is a fantastic time to start. You don’t need to master everything at once — blockchain may sound complex, but you can ease into it with a solid web development background. Skills like Python, JavaScript, back-end development, and version control are key when it comes to building blockchain applications.

To get started, consider signing up for the Skillcrush Break Into Tech – Full Stack Stack Developer Career Track. It covers all these skills and more, giving you a solid foundation as you build your blockchain career — well, block by block.