A gentle introduction to blockchain

Introduction Blockchain

Written by Matthew Mcilwham, Founder and President of Newcastle University Cryptocurrency and Blockchain Society

This article is a brief introduction to blockchain technology, it will get you up to speed for the Digital Leaders Salon in Newcastle upon Tyne on the 22nd of February 2018.

There are two main topic areas to discuss:

  1. What does a blockchain consist of?
  2. How does a transfer of a digital asset work?

So, the first misconception with blockchain technology is often that it is a singular concept, that there is only one blockchain. A blockchain resembles more an umbrella term, think of blockchain as a digital infrastructure and bitcoin as an application, a cryptocurrency. Anyone can create a blockchain, and the use-case for them is almost endless. Although, it doesn’t mean it’s the best solution for everything.

To demonstrate why the technology is so revolutionary, let’s look at the sole reason it was created. Imagine it’s 2007, house prices are starting to fall, the news has spread that people are beginning to default on their mortgages and those entrentched debt instruments are starting to collapse, a lot of trust has been lost in the banking sector. A person or persons by the name of Satoshi Nakamoto sets out to create a trustless payment network — the result, Bitcoin. A decentralised peer to peer payment network which needs no third party.

The keywords here are no third party, no intermediary and decentralised, you are the sole owner of your digital assets and a decentralised network has no single point of failure. This is why blockchain technology is causing a stir in almost every industry.

So how does it work?

The idea relies on a concept called “Distributed Ledger Technology”. To assimilate the construct, imagine your checking account at the local bank, every time you make a transaction, the bank updates your ledger and subsequently your balance. Bitcoin replicates this system but with a fundamental difference, the ledger is not updated by one entity i.e. your bank but all participants in the global network, synchronising a record and checking it against each other.

The blockchain is essentially a digital record of all transactions that have happened since the genesis block.

Next, let’s dissect the block itself:

Block in Blockchain

The Hash

The Block Header contains the information of all previous blocks, at each stage the block of information is hashed by the SHA-256 algorithm, hashing essentially provides an immutable record and unique method of checking whether or not something in the blockchain has been attacked in any way. To simplify the Hashing concept consider this example:

If I hash the following three words, even though the changes are simply a lowercase letter and a character to a numeric value, the hash is completely unrecognisable.


If any single adjustment is made at any point throughout the blockchain, the hash will immediately flag up the error, this cryptography function provides our security in the trustless system.

Block Index

The number of Blocks since the beginning of the chain.


The time and date of the block and transactions


How many Bitcoins are being sent.
The public key of the receiver.
The address of the sender.

Digital Signature

How do you prove who you are in a transaction with no identity associated with it?

A digital signature uses a cryptographic signature algorithm, the sender signs their message with their private key, which can later be unencrypted with their public key. The trust is built from the assumption that only the sender holds their private key. As demonstrated in the image below:

Blockchain Digital Signature

Proof of Work

The final step in a transaction is to validate it. This is done through miners and a Proof of Work through a cryptographic puzzle.

A miner is a participant in the network who works to regulate and maintain the bitcoin network. The process collects transactions into a block of information and every ten minutes is submitted to the blockchain to be verified, the miner then attempts to find a “nonce” such that completes the cryptographic puzzle. After the answer is found, the nonce is broadcast to the network for all other participants to check, update their records and work on the next block.

A summary of a Bitcoin transaction:

Summary of a Bitcoin Transaction Infographic

Source: http://janzac.com/how-bitcoin-transaction-works/

This article was originally published here and was reposted with permission.


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