Blockchain is the basis for cryptocurrency, as well as being a technology that is increasingly being applied to other industries that also require a secure and transparent way to track items.

But without a layman’s explanation, it can be difficult to understand what it actually is.

In this introduction to blockchain, you’ll learn about what a blockchain is, an overview of the different parts that make up a blockchain, why blockchain technology is important and what the future holds for this exciting technology.

What does blockchain mean?

Essentially, a blockchain is a digital record keeping system.

The ‘blocks’ in blockchain are individual computers, each of which holds a copy of the record. Because each computer has a copy, it’s easy to identify if one of the records on one of the computers is hacked or changed as it will be different to the others. These hacks can then be ignored, which makes the blockchain extremely difficult to hack.

A blockchain can keep records of anything that can be represented digitally such as money, title deeds, documents, etc.

What makes blockchain exciting is that this digital system requires no administrators to maintain it. A blockchain is a new way of storing information and is a collection of groups of information (blocks) that are linked to each other and are constantly being added.

We’ll now look at some of the most common terms associated with blockchains:

  • Ledger
  • Node
  • Address
  • Hash

While these may seem like jargon, they are actually pretty simple concepts, and understanding them will help you understand not only how blockchain works, but also why it’s so important.

What is a ledger?

When you read or watch introductions to bitcoin or cryptocurrency, you may hear people talking about ‘a distributed ledger’, as if this is meant to perfectly convey exactly what it is. For most people, it doesn’t come close!

First off, let’s look at what we mean by ‘ledger’.

Similar to accounting, when we say ‘ledger’, we’re basically referring to a book or other collection of financial accounts.

The ‘decentralised’ part of the definition comes from the fact that each of the parts of the blockchain each have their own copy of the ledger on it, each of which are identical.

As such, there is no one ‘centralised’ ledger or record of accounts. Instead, it is ‘decentralised’, or ‘distributed’ throughout the whole blockchain.

To do this, a blockchain makes use of a community of computer users, called ‘peers’. Each of the computers are known within the blockchain community as ‘nodes’, with each node on the network keeping a copy of the blockchain and responsible for processing and verifying the transactions that take place.

What is a node?

A node is a computer on the blockchain that fulfills specific obligations on the blockchain.

Think of it like a member in a large community that has a certain job in the workforce. This member can either be a plumber, an electrician, or a shopkeeper. Likewise, a node can either keep a record of the whole chain, or it can be a wallet on the blockchain, or it can be a mining node that mines cryptocurrency.

What does hash mean?

Each block on the blockchain has a unique digital fingerprint, called a hash.

A hash is a way of converting all of the information contained in the block to a secret code, which is made up of a seemingly random string of letters and numbers:

This secret code allows the information to  remain public (so that it can be checked and verified by the other parts of the blockchain), while only only being able to be deciphered by people authorised to view it using a decryption key.

This allows you to transact freely and in privacy with other people on the blockchain, while staying safe and secure.

What is an address?

Before interacting with people on a blockchain, you have to open an account on the blockchain.

This blockchain account is similar to a bank account. It’s made up of different parts, namely a private key and an address.

An address is a collection of numbers and letters in a specific format that allow you to receive funds or information securely. The best way to think of an address is as the account number of your bank account, while the private key is like a pin number to your bank account.

When sending and receiving funds on the blockchain, it’s vitally important to keep your private key safe and not share it with anyone. Think if it like your bank’s PIN – you wouldn’t share this with anyone else. However, unlike your bank’s PIN, there’s no recourse with cryptocurrencies and blockchain if anything goes wrong: it is up to you to keep your information private and secure.

Why is blockchain important?

Blockchain technology comes with many benefits, especially for under-developed and developing countries. To better appreciate its benefits, we first need to understand why blockchain was created.

Blockchain technology was first introduced to the world in 2009 as a solution to the lack of accountability in large financial institutions following the 2008 financial crisis. At that time, it was evident that there was a problem that needed to be addressed: the world needed a financial system that was fully transparent, instilled a sense of accountability, and was very secure.

It is for this reason that the first successful blockchain was created and introduced to the world in 2009 as Bitcoin.

Benefits of blockchain technology


As mentioned, blockchain technology is a transparent system: the information stored on the blockchain can be viewed by anyone. This information could be transactions between people in a financial blockchain or ownership of property in a title deeds blockchain.

3rd world and developing countries like South Africa, and the rest of the African continent, will find this desirable when monitoring the transactions of local governments. Corruption occurs globally and does have a socio-economic impact on the citizens of a country – something that we are seeing in South Africa.


The biggest intrigue and benefit of blockchain technology is its decentralised nature. Earlier in the article we discussed that blockchain technology does not need any administrator to maintain it or to verify and process the information on it. It relies on its community to do this – the community being a large group of computers.

As a community, each member has a specific role in the blockchain. They’re either the metaphorical IT technician, or the admin clerk, or the electricity provider in the blockchain ecosystem. Each member shares the same responsibility and that is to ensure that everyone acts in good faith on the blockchain. This is to ensure that no money is stolen on the blockchain and that no fraud takes place on the blockchain.

Direct transactions

As blockchain does not need anybody to verify and process the information and activity that takes place within it, users can transact directly with each other with no middle man.

Each person that uses the blockchain is called a “peer”.

Blockchain is regarded as a peer-to-peer or P2P ecosystem since no middle man or third party needs to be involved in transactions. This is great for the users of the blockchain since they wouldn’t have to rely on middle parties to keep the blockchain running.


The information stored on a blockchain is translated into a secret code – it’s encrypted – so that only people authorised to view the underlying information can do so.

This is especially important when blockchain is being used to hold information that required extremely high levels of security, such as the balance in a cryptocurrency wallet. Without this level of security, other people could learn how much money you have and what you own – not ideal!

This is why the information is encrypted, or translated, into a secret code. This translated information can only be read and understood by the people who the information belongs to.

Dentralisation also adds to the security of blockchain technology.

Hacking a blockchain is extremely difficult as the large community of computers each support each other and ensure that the blockchain functions as intended. Each of these computers are incentivised to report any computers that are not acting in good faith, such as a hacker trying to steal money. This benefits blockchain users as fraudsters and criminals aren’t able to exploit individual elements within the blockchain.


Although anyone can view the information on a blockchain, the information will not really make much sense as it is translated into a code, called a hash, which only authorised people can read. An example of a transaction on the blockchain is:

How is blockchain used?


The main application for blockchains is cryptocurrencies such as Bitcoin, Ethereum, etc.

As blockchain is a means to represent and transfer ownership between users, it can also be used to show and transfer ownership of information relating to currency holdings.

All of the advantages that we’ve discussed so far – transparency, security, privacy – make blockchain a more effective way of storing ‘value’ than traditional currencies and banks (as long as users are careful and avoid cryptocurrency scams).

Cryptocurrency can therefore be seen as a tool to facilitate the transfer of information on the blockchain between users. Cryptocurrencies enable you to transact information with the security of a blockchain and the ease of an interchangeable token.

Decentralised Applications

The creation of the ‘Ethereum’ blockchain allowed decentralised applications to be born.

These applications are built on the blockchain, with code shared across nodes, allowing them to run without the need for administrators.

A few examples of decentralised applications are Chainlink (a smart contract solution which automatically completes once the terms are fulfilled), Brave (a security-focused web browser), and KYC-chain (an anti-money laundering application). Building these applications on the blockchain enables functionalities to be created that would not have been possible with traditional  that were never before possible prior to the invention of blockchain technology.

Immutable record keeping system

As we’ve learnt, blockchain is a new type of record keeping system that can be used to keep records of anything that can be represented digitally, such as title deeds, account balances, or documents. One of the great things about blockchain is that historic records cannot be changed or edited in any way – they are ‘immutable’.

This is important because it holds people accountable for their actions as everything they do on the blockchain is recorded permanently.

What’s the future of blockchain?

As an emerging technology, Blockchain still has an uncertain future. Predictions are still both positive and negative about its potential.

The possibilities offered by decentralised applications are still being explored, as developers create applications with never-before-seen capabilities. Only time will tell which industries will make use of this new technology, but it’s evident that this technology can be used in sectors other than the financial sector.

Cybersecurity is one of the most promising areas of growth for blockchain technology. As businesses of all sizes are face ever-increasing threats of data hacking, blockchain technology can be used to prevent such attacks. It allows data to remain secure while allowing active participants to continually watch the Blockchain to verify every transaction’s authenticity.

In the immediate future, the most visibile use of blockchain will likely continue to be Bitcoin and other cryptocurrencies. Crypto has grown in popularity within the world of finance and is approaching mainstream adoption as hedge funds and other investment firms begin to serve the demand for these alternative cryptocurrency investments.