What is Blockchain and How Does it Work?

Blockchain has become a bit of a buzzword in media headlines in the last few months. But although it’s everywhere, it can be pretty hard to explain what it is. 

What is it?

Made popular by mystery man Satoshi Nakamoto in 2008, blockchain is a lot like Google docs. It works by sharing a single file between an international group of computers. When one computer (or node) edits it, the file is updated for everyone. It’s basically a decentralised set of records.

Why is it Special?

Blockchain allows us to store information like agreements and payments in transparent, shared databases that can’t be hacked. Its wide adoption would mean that we no longer need middlemen like lawyers and bankers to secure these things instead.

How Does it Work?

To make a transaction using the blockchain, you first need a digital wallet. Protected by cryptography (a secure code), each time you want to send a payment to someone else, you need to make an encrypted transaction request to the computers (known as “nodes”) on the network.

Once they have verified the request is real and valid by decoding it, it can be logged on the shared file (or ledger) with a cryptographic signature of the previous transaction. This is what creates a secure record, or a chain of “transaction blocks”. After all, every transaction is linked to the one before it. 




This is what makes blockchain so secure. To hack one block, you need to hack all the blocks before it. What’s more, you’d also need to hack a majority of the computers that have a copy of the blockchain too. And the computer power needed to do this is exceptionally difficult to get.

What is Blockchain Used for?

Blockchain has many applications. The most well known is Bitcoin, a virtual currency that doesn’t need a bank or government to work, unlike normal currencies.

But it has many other uses too. One application of it known as Ethereum, has been used by the UN Food Programme to transfer $1.4 million in food vouchers to 10,500 Syrian refugees in Jordan in 2017. It’s also used to distribute renewable energy, and is being developed to tackle voter fraud and improve government efficiency.

To conclude, blockchain works a little like google docs- only it’s much more secure and has many more applications. With potential to disrupt many industries, it’s a technology that we can definitely expect to see more of in coming decades.



Annie Lennon

Writer with an insatiable curiosity for people, facts and places. Currently interested in learning more about making our way towards a blue economy.