What Is A Blockchain?

January 2, 2022

If you’ve found this article, there’s a good chance you’ve heard that bitcoin is built on top of blockchain technology… But you have no idea what a blockchain is. 

While bitcoin is the most popular use case for a blockchain at the moment, blockchains can be used for more than just digital currencies. 

Starting at the beginning, a blockchain is a database. But not your conventional database stored on a company’s servers. 

A blockchain database is shared amongst many nodes (in this case servers) of a computer network. This makes it a distributed database. 

The distributed nature of a database makes it much more resilient. For instance bitcoin has tens of thousands of servers around the world with copies of the entire blockchain. If one server goes down, there are still thousands of other servers to maintain the integrity of the data. 

How Blockchain Got Its Name

Developers aren’t known for their creativity. And this is no exception. A blockchain got its name for how data is updated on the database. 

New data is entered into a new “block” of data. And once that block has enough data, it is “chained” onto the previous block. This makes the data chained together in chronological order - which is good for many purposes.

The main purpose has to do with the ability to audit the history of the data. It is easy to see when data entered the database and how it got there. 

That makes a blockchain useful for ledger activities… Such as creating a currency. That’s why bitcoin uses blockchain technology to keep a record of who owns what satoshi - the smallest unit of a bitcoin.

But this also makes blockchains useful for:

  • Tracking goods along a supply chain

  • Helping medical institutions update health records

  • Track records of property ownership

  • Track ownership of digital art

  • Settle stock and bond trades in the public markets

  • And more...

Another major use for blockchain will be smart contracts. In the simplest terms a smart contract is a digital contract that will automatically settle the contract when the terms of the contract are completed. We already see these smart contracts being used among various blockchains like the Ethereum blockchain. 

So for instance let’s say you bet someone $100 that the Tampa Bay Buccaneers would win their next football game straight up. It gets put into a smart contract, and the contract holds $100 from each bettor. And then if the Buccaneers win, you get your $100 back plus the $100 from the person you bet with automatically. It goes straight to your account… No need to have to go collect from your bookie. 

And with these smart contracts copied onto different servers supporting the blockchain, you will have an immutable record of the bet. There’s no backing out. 

Smart contracts are an important and growing use case for blockchain. And many cryptocurrencies are seeing additional interest because their blockchains support smart contracts.

It’s important for crypto investors to keep our eye out for new use cases of blockchain technology… It might just be the next big opportunity.

Read This Next

Number One Thing to Do When Making Your First Crypto Trade

With the immense opportunity in crypto, there is also a lot that can go wrong. Be sure to read this article before your next trade.


Basics of Trading Cryptos: Fundamentals vs. Technicals

Understanding and forecasting crypto prices can be accomplished with many different strategies.


Differences Between Centralized and Decentralized Exchanges

Buying crypto may seem complicated. But once you read this article, you'll have a much better understanding of crypto exchanges.


What Is A Smart Contract?

As the main building block of many decentralized applications, the smart contract is revolutionizing countless industries.


What Is Bitcoin?

Is it the future of money? Or is it one big ponzi scheme? Read on to learn about Bitcoin.


What Are Cryptocurrencies?

You've probably heard the term, now is the time to learn about cryptocurrencies.


See All Articles


The Ever-Growing Community Of Investors

A membership can take your crypto skills to the moon!

Learn How To Join »