What Is Blockchain?

What Is Blockchain?

What is blockchain, how does it work and what are its uses? If you are a little familiar with blockchain, these questions are for you too. Most of the articles on this revolutionary technology on the Internet have explained the subject in a technical and complex way that is not very understandable to a beginner or even a professional. Join Lumenswap as we answer all of these questions in simple terms.Blockchain technology is a topic that is almost in the discourse of most people in society these days, But few people know exactly what blockchain is, and people's definitions and perceptions are often not so comprehensive. This technology, which has grown steadily over the past decade and is becoming more and more popular, has a history of more than a decade, and the basic roots of the idea of such a network can be traced back to the last millennium.Most people consider blockchain to be a digital currency and use the two propositions interchangeably. Let us first emphasize that digital currency was part of the blockchain; But blockchain is now a much larger technology than digital currency and has found a special place in computer science. Before we know how to invest in blockchain, we first need to know what blockchain is and how it works. In fact, understanding the blockchain process has a strong positive impact on investing in it.

What is blockchain?

Blockchain is very similar to an information recording and reporting system. With the difference that everything that is recorded on this network is available to everyone. That is, it is shared between network members. The possibility of hacking or manipulating the information recorded in this system is almost eliminated by encrypting and distributing the data.The concept of blockchain first emerged with the advent of Bitcoin, and the king of digital currencies used this strategy to store information about users' public.To better understand blockchain, consider the following example:Suppose in a group of 100 people, I write information on a piece of paper and ask the members of the group to take pictures of that page with their mobile phones. Now if I delete that information, or change it, it is not acceptable to that group, because they have a copy of the original, unless I take everyone's mobile and delete it.The group we talked about could be the millions we see in Bitcoin and Ethereum and other blockchain digital currencies or used privately for a specific group.Blockchain networks can also be used for specific purposes. If used privately and for an institution or organization, we call it Enterprise blockchain, which, of course, according to experts in this field, this type of network is no longer a blockchain because it does not meet its main purpose of decentralization.

The main role of blockchain in Bitcoin

If we want to understand the relationship between Bitcoin and blockchain, we have to look at the structure of Bitcoin. The main basis for the formation of digital currencies such as Bitcoin is blockchain. The official currency of each country is under the supervision and approval of a central authority such as the government or the bank. If a country is exposed to many problems that lead to government instability, the value of that country's currency is at stake. These important reasons led to the creation of digital currencies, and Bitcoin emerged as the first digital currency.Bitcoin digital currency operations have spread across computer networks. This operation made this currency and other digital currencies no longer need a central reference. This both reduced the risk and eliminated a lot of processing and transaction costs. Therefore, using digital currency for countries with unstable currencies makes them have a more stable and practical currency. It also contributes to a wider network of individuals and institutions domestically and internationally.

How does blockchain work?

To learn the concept of blockchain, it is best to start with the fact that the word blockchain is a combination of the two words block and chain. Which eventually becomes a chain of blocks. Each block contains information. This information includes anything including financial or technical matters and so on.In the image below, we have tried to explain blockchain with an example. Each block in this image shows a country in which the cities of each block are registered.

Inside each of these blocks is something called a hash. A hash is actually a text that is generated using a mathematical function. The hash is used to prevent fraud. This text string, because it is always fixed, does not allow changing information on the blockchain.For example, in the image above for the "Italy" block, which contains information about the names of the cities of Rome, Venice and Milan, the hash block is "NYLAC". In blockchain, blocks not only have a hash themselves, they also contain a previous hash block. The slightest change in the information of a block changes its hash altogether and invalidates the blockchain. For example, if a character is added to Italy's city name information, the hash block will change and as a result the next blocks will be invalid.

How is blockchain safe?

What if someone changes the content of a block and updates the hashes of subsequent blocks? It is possible, but the distribution solution in blockchain solves this problem. Not all data in the blockchain is stored on a computer or server. Instead, every computer that connects to the blockchain network receives a copy of its information. These computers that connect to the network and receive a copy of the blockchain are called nodes.

Since others, like you, have received a blockchain version, no change is possible. Unless all network nodes agree to the change. Blockchain technology is not a fundamental technology in itself, but a combination of the processes of alerting, cryptography, mass distribution, and so on..


One of the most important features of blockchain is decentralization. This means that no computer or organization can own a chain. Instead, its network consists of a general ledger distributed through nodes connected to a chain. Nodes in a blockchain network are any electronic device that can store a copy of the blockchain and help the network function. Each user receives a unique identification number

Every user on the network is known as a Node, and all users have an up-to-date version of the general ledger. Each node has a different way of communicating with other nodes, the method of which is blockchain to blockchain.In the first step, a user requests a transaction on the network. By submitting the request, a block with all transaction information is created. This block is encrypted to ensure information security. The new block is then spread across all active nodes in the network so that other nodes can validate the user request. Blockchain uses the Consensus Algorithm process to validate requests. When the created block is valid, it is placed in the chain and the transaction requested by the user is executed.

Advantages and disadvantages of blockchain

Once we know what blockchain is, we can now better understand and critique it. For all its complexity, Blockchain is almost unlimited as a decentralized record-keeping platform. From more user privacy and increased security to less processing costs and errors, Blockchain may be able to support applications beyond today's applications. But it also has drawbacks.


  • Improve accuracy by eliminating human interference in the verification process.
  • Reduce costs by eliminating third party approval.
  • Decentralization makes it difficult to change and manipulate.
  • Transactions become secure, private and efficient.
  • Transparent technology.


  • Low number of transfers per second.
  • History of use in illegal activities.
  • Lack of comprehensive and codified regulations.

Blockchain use cases

The goal of learning any topic is to finally get it practical. At the beginning of the article, we discussed what blockchain is and then went into detail. We now turn to the applications of blockchain, of which there are many uses today.

1. Use of digital currency

We mentioned earlier that one of the applications of digital currency blockchain is that many currencies such as Bitcoin have been created on its platform today. In this section, we examine the use of digital currencies.Currencies such as the US dollar and many other world currencies are approved by a central or government bank. As a result, an individual's capital depends to a large extent on political and governmental factors, as well as the banking system there.Blockchain by digital currencies allows you to no longer need a major reference such as the central bank. It also gives countries with volatile currencies (such as Venezuela) a more stable and broader currency.

2. Use blockchain in supply chain

Gives manufacturers access to record product authenticity. In this way, companies can test their products in terms of health, organic and so on.According to the latest reports, most industries, especially food, are turning to blockchain to ensure the authenticity of their products.

3. Use in elections

What is the use of blockchain in elections? By educating everyone about blockchain, voting irregularities can be greatly reduced. For example, in the 2018 midterm elections in Virginia, the United States had fewer irregularities and the turnout increased.

4. Use in health services

When a medical record comes into play, it can be put in this chain. The use of blockchain in the field of health services gave patients hope that their case would not be changed. Because by creating a private click on the blockchain, they are encrypted and only certain people can see it.

5. Use of real estate services and transfer of ownership

You are probably one of those people who have spent a lot of time in the registry office and found that the process works and is annoying. Blockchain has the potential to eliminate document scanning and tracking, as well as the physical presence of individuals in firms. If property ownership is maintained in the blockchain, owners can ensure that their document security is maintained forever.


With the arrival of blockchain in banks, customers can do their job in just ten minutes instead of waiting a few days. It also saves time and money for the banks themselves.


It may be easy to answer the question of what blockchain is, but it must be admitted that understanding this technology and the phenomenon of the world economy today will not be easy. In fact, there are few people who can correctly identify and predict the path ahead of cryptocurrencies. Especially since the youth of this technology makes it very influential from the outside world. So, we need to know what the blockchain answer is just the beginning.