Blockchain Tutorial for Beginners: Learn Blockchain Basic Concepts

Blockchain has become one of the most sought-after skills in the tech sector. According to a 2018 PwC survey on 600 executives belong to 15 different regions, around 84% of the respondents said they were using blockchain in some way. (Source)

Even in India, the demand for blockchain professionals is increasing rapidly as both government and private organizations look for ways to use this robust technology. All of this buzz can make you wonder, “What is Blockchain?” 

To help you find the answer to this question, we have prepared the following blockchain tutorial for beginners. It covers all the necessary aspects of blockchain so you can get familiar with this technology and pursue a career in blockchain. 

Nevertheless, it is a very detailed blockchain tutorial so we recommend bookmarking this page. You can keep it as a reference to come back to it later. 

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We’ll start our blockchain tutorial for beginners by explaining blockchain first: 

What is Blockchain? 

The term “blockchain” is made up of two words “block” and “chain”. We can define blockchain as a chain of blocks containing information. Blockchain timestamps digital documents so it is impossible to tamper with them or change their date. The primary goal of blockchain is to solve the problem of keeping double records without requiring a central server.

A blockchain is a constantly growing ledger that securely and permanently records all transactions in a chronological and immutable manner. Let’s Break it:

• Ledger: It refers to a continually growing file.
• Permanent: Once a transaction is added to the blockchain, it becomes a permanent entry in the ledger.
• Secure: Blockchain utilises advanced cryptography to ensure that information remains secure within the blockchain.
• Chronological: Transactions occur in sequential order, with each new transaction following the previous one.
• Immutable: As transactions are added to the blockchain, the ledger becomes unalterable.

A blockchain is composed of interconnected blocks that store transactional information. Each block records recent transactions and, upon completion, becomes part of the unmodifiable blockchain database. The process continues as new blocks are generated. Also blockchain technology tutorial is essential to understand the intricacies of this innovative technology in the real world.

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It is an incorruptible digital ledger of transactions that you can program to record nearly everything of value. The simple version of a blockchain is a chain of blocks holding records of transactions taking place in the network. 

Note that the “block” in the blockchain is digital information while “chain” is a public database. In a blockchain, the blocks are spread across multiple systems and not just stored in one place. 

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How Do Blocks Work? – Explaining the Blockchain Technology

A block stores all the primary details about transactions including the time, date, transaction amount, etc. It also stores information about the participating entities of the transaction. For example, if you purchase a product from a vendor, the block would record your unique digital signature. Yes, it doesn’t store your name. In a blockchain, every user has a unique digital signature and the information about their transactions is recorded by using their unique signature, not their actual name. 

The users of the blockchain aren’t the only ones who have unique qualities. Every block in a blockchain network has a unique code which makes it distinct and separate from the rest. This unique code is called a “hash”. 

How much data a single block can store depends on the size of the transactions. One block is capable of hosting a few thousand transactions and the hash code ensure that every block in the blockchain is in sync with the others.  

If there are too many blocks in the blockchain, the ledger size would increase accordingly. The large network of the ledger is the primary reason why a blockchain is so secure. Because it is decentralized, the failure of one block wouldn’t cause the entire network to fail, allowing the network to remain intact. Moreover, if the security of one block is compromised, it wouldn’t result in the breach of the entire blockchain. 

Blockchain is a software protocol similar to SMTP for email. Nevertheless, you can’t run a blockchain without the internet. 
 

What Constitutes a Blockchain Wallet?

A blockchain wallet serves as a digital repository utilized for the storage, management, and interaction with cryptocurrencies. It empowers users to securely safeguard their private keys, which are indispensable for accessing and managing their digital assets on the blockchain. Blockchain wallets manifest in diverse forms, encompassing software wallets, hardware wallets, and online wallets, each affording distinct levels of security and convenience. A blockchain tutorial for beginners can provide valuable insights into the world of digital currencies and their management.

Blockchain Use Cases

Blockchain is a versatile and robust technology. Due to its unique nature, almost every industry can benefit from integrating it into its daily operations. 

Potential Use Cases

Blockchain is a relatively new technology and we can use it in many sectors. Following are some of the potential use cases of blockchain:

Bookkeeping and Record-Keeping

Every industry has to perform bookkeeping and store records. These records possess valuable information leaking of which can cause many issues for the corresponding business. Blockchain offers a highly secure way of bookkeeping and record-keeping, ensuring that unwanted parties and malicious people can’t access them. 

Voting 

To prevent voting fraud, governments can use blockchain technology for issuing voter IDs and recording votes. As we have discussed before, blockchain provides a highly secure solution for storing data and making changes to the data stored in the blockchain is very challenging. Blockchain can help in keeping the voting process transparent and quick. 

Self-Driving Cars

Apart from using AI and machine learning, self-driving cars would utilize blockchain technology to keep their data secure and safe from unwanted parties. In 2019, IBM filed a patent for a project that permits information management for self-driving cars through blockchain. 

Robotics and IoT

Through blockchain, you can create a decentralized network of drones and robots. It ensures that the failure of one drone wouldn’t affect the rest of the network. 

Data Management in Healthcare

Hospitals, nursing homes, and other medical institutes can use blockchain to store and manage data about their inventory, patients’ medical records, and the institution’s financial transactions.  Learn more about blockchain technology use cases.

Existing Use Cases

Here are some of the real-life examples of blockchain implementations:

Blockchain in Dubai

The smart Dubai office, in 2016, launched the blockchain strategy to connect entrepreneurs and developers with investors and venture capitalists. It aimed to enhance the development of Dubai and make it ‘world’s happiest city. They aim to make Dubai a fully blockchain-based city by 2020. 

UN World Food Programme

The UN World Food Programme had used blockchain technology in 2017 to help the rural areas of Pakistan’s Sindh region. They sent food, money, and other necessary material to the residents and used blockchain to record all the transactions. Blockchain ensured that all of its transactions remained transparent and secure. 

Blockchain-based Startup

Incent is a startup that allows businesses and content creators to grow their audience, reward them and monetize the content. It is Consumer retention as a service (CRaaS) solution where the system generates codes for the viewers of a specific creator. The viewers can redeem these codes and earn rewards, benefitting both the creator and the viewer. They use blockchain technology for their transactions. 

Cryptocurrencies (Bitcoin, Ethereum, etc.)

Our blockchain tutorial for beginners would be incomplete without mentioning the most popular application of blockchain technology, cryptocurrencies. Bitcoin, the most popular cryptocurrency right now, was the first application of blockchain and it offers many advantages to its users. Cryptocurrencies allow businesses to conduct transactions safely and more efficiently. 

Misconceptions About Blockchain (What Blockchain is Not)

To understand blockchain, you must first distinguish between the truths and myths surrounding this technology. Here are some of the common misconceptions about blockchain, you should know:

Myth: Blockchain is a Replacement of a Transaction Processing System 

Reality: You can use blockchain to replace a transaction processing system only in particular scenarios. It is not a replacement for a full-fledged transaction processing system. 

Myth: Blockchain is Necessary Even if There is No Business Network

Reality: If a business network doesn’t exist, you don’t need to implement blockchain technology. 

Myth: Blockchain is a Product 

Reality: Blockchain is not a product you can buy. The utility in the blockchain is because of the various applications you can build on top of it. 

Myth: Blockchain is All About Bitcoins Or Blockchain is Bitcoins 

Reality: Although bitcoin is the first application of blockchain, blockchain is not all about bitcoins. Bitcoin is a cryptocurrency based on blockchain where bitcoin is the digital token and blockchain is the ledger. You can have a blockchain without bitcoins but you can’t have bitcoins without blockchain. 

What are Blockchain Variants?

In this section of our blockchain tutorial, we’ll cover the different variants of blockchain technology. 

Public Blockchain

The distributed ledgers in the public blockchain are visible to every user. Here, every user is capable of modifying and verifying the blocks present on the blockchain. Some prominent examples of public blockchain are Ethereum, Factom, and Bitcoin. 

Private Blockchain

A private blockchain network usually belongs to a particular organization. Here, only several particular people of the organization can modify the transaction blocks. Still, any person can view the blocks but they can’t modify them. You’ll need permission from the particular users to modify the blocks present in such a network. Blockchain and Multichain are two prominent examples of the private blockchain. 

Consortium Blockchain

In a consortium blockchain, only a group of people or organizations can add and verify transaction blocks. The ledger in such a network is open to only a specific group. It is highly secure and is used by organizations in only particular sectors. Examples of consortium blockchain are R3, Hyperledger 1.0, and Ripple. 

Hybrid Blockchain

A fusion of public and private blockchains that allows for flexibility in data sharing. It permits select transactions to be public while maintaining the confidentiality of others. Hybrid blockchains are well-suited for applications necessitating both transparency and data privacy.

What are Blockchain Philosophies?

There are philosophies in the blockchain:

• Permissioned Blockchain
• Permissionless Blockchain

Following are the differences between these two philosophies:

Permissioned Blockchain

In a permissioned blockchain, you have an access control layer to allow only a particular group of people to perform some actions. Such configuration keeps the transactional activities of the network’s users in check. Permissioned blockchains are popular among large companies and enterprises due to their high level of security. 

For example, an IT-services provider might implement a permissioned blockchain network to record the sensitive information of its clients. Even though some third-parties might be involved in the transaction processes of such information, they shouldn’t have access to the sensitive information present in those transactions. A permissioned blockchain would ensure that the third-parties can’t access such information. 

Permissionless Blockchain

As the name suggests, a permissionless blockchain is the opposite of a permissioned blockchain. Unlike permissioned blockchains where only a few people have access to the blockchain, anyone can access the blockchain in a permissionless blockchain.

Bitcoin and Ethereum are two notable examples of permissionless blockchains. Here, Proof of Work mining (PoW) is necessary and the hashing power determines the trust-level. What is Proof of Work? That’s what we’ll discuss in the next section.

Comparison of Blockchain and Databases

Blockchain:

Blockchain is a distributed ledger technology that uses blocks to store information. It is built on a decentralised network in which all users validate and verify transactions. Each block contains hashed data from the previous block, ensuring cryptographic security. Blockchain offers advantages such as time reduction, unchangeable transactions, reliability, security, and decentralization.

Databases:

Databases are centralized systems managed by administrators. They store and manage data with defined access rights. Databases are efficient, easily maintainable, and support data sharing among authorized users. They provide features like redundancy control, data backup and recovery, and multiple user interfaces.

Blockchain vs. Database:

• Decentralization: Blockchain is decentralized, while databases are centralized.
• Permission: Blockchain is permissionless, while databases require permission for access.
• Speed: Blockchain is slower, while databases are faster.
• Record History: Blockchain maintains a history of records and ownership, whereas databases do not.
• Confidentiality: Blockchain offers full confidentiality, while databases may not be fully confidential.
• Operations: Blockchain supports only insert operations, while databases support create, read, update, and delete operations.
• Robustness: Blockchain is considered fully robust, while databases may not be entirely robust.
• Disintermediation: Blockchain allows disintermediation, while databases do not.
• Writing Access: Anyone with proof of work can write on the blockchain, while databases restrict access to authorized entities.
• Recursion: Blockchain is not recursive, while databases allow repeating tasks on specific records.

The choice between blockchain and databases is determined by the application’s particular requirements and the intended system features. If you want to learn more about blockchain, you may look at a thorough blockchain development tutorial to obtain a better knowledge of its ideas and implementation.

Why is Blockchain so Secure? (PoW and Distributed P2P Network) 

We already know that blockchain is a chain of blocks that contain transactional information. We also know that every block has a hash as its unique signature. However, hashes aren’t sufficient to keep the blockchain network secure. 

Advanced computers can calculate hundreds of thousands of hashes within seconds and a hacker can modify a block without permission. Then, he or she can repeat the process to manipulate the rest of the blockchain. 

However, blockchain has two solutions for tackling this problem and they are: 

• Proof of Work (PoW)
• Distributed P2P Network 

Proof of Work

Proof of Work is a computational problem that requires significant effort to solve. However, it takes very little time to verify the results of this problem in comparison to the time taken to solve it. 

Thus, if a hacker wants to manipulate a blockchain, they will have to perform Proof of Work for one block, implement the modification and then redo the entire process for the succeeding blocks. Combined with hashing, Proof of Work makes blockchain a highly secure solution. 

Distributed P2P Network 

Every blockchain has a distributed peer-to-peer network. It doesn’t have a central authority to manage the chain, instead, it relies on the peer-to-peer network for this task. 

When a user joins the blockchain network, they get a full copy of the blockchain and every computer in the network is called a node. When a new user creates a new block in the blockchain, it gets sent to all the users present on the network. 

Now, every node (computer) must verify the block after which it can be added to the blockchain. All the nodes present in blockchain create a consensus about which blocs are valid and which aren’t. If a tampered block exists in the blockchain, then the nodes will reject the same.

With the distributed P2P network, the hacker must now take control of more than 50% of the network after gaining access to a block and redoing the Proof of Work for every block to manipulate anything. Due to this, the blockchain becomes significantly secure. 

How Do Blockchain Transactions Work?

We have discussed that a blockchain stores transactional information, but how does a transaction take place in one? Here is how:

1. A user would request a transaction related to the specific blockchain (cryptocurrency, records, contracts, etc.). 
2. The requested transaction is sent to every node in the peer-to-peer network. 
3. The nodes validate the transaction and the user’s status by using the required algorithms. 
4. When the transaction is completed, a new block is added to the blockchain such that it is unalterable and permanent. 

In conclusion, the steps of a blockchain transaction are:

1. Request
2. Broadcast
3. Validation
4. Addition

This process is the same for any kind of blockchain no matter what application it’s used for. Whether you use the blockchain for a cryptocurrency or for keeping records, you’ll have to go through this exact process to add a new block into the blockchain. Learn more about how blockchain technology works.

Why Do We use Blockchain?

There are many advantages to using blockchain. Here are the most significant ones:

Security

With so many security provisions in place, blockchain is among the most secure technologies available to us. Tampering with it is nearly impossible. 

Flexibility

From healthcare to transport, you can use blockchain in any industry. All you need is a working knowledge of blockchain and the industry you want to implement it in. 

Automation

Most of the operations in a blockchain are done by software implementations. Such automation makes blockchain networks highly efficient. 

Transparency

Every change made in the blockchain is visible to all the users that have access to the same. This keeps things transparent and enhances the versatility of this technology. 

Global Adaptation

Organizations all across the globe are implementing or trying to implement blockchain in one way or another. It is a globally recognized and adopted technology and it’s gaining popularity. 

Reliability

Every interested party in a blockchain transaction is certified and verified. This removes the need for double records and makes the transaction process much more reliable. 

Going Beyond the Blockchain Tutorial for Beginners

Our blockchain tutorial for beginners covers the fundamentals of this topic. As you must have guessed by now, blockchain is a vast field with a lot of sub-sections and technicalities. Learning about all of them by yourself can be tricky. 

The best way to learn blockchain is to get a blockchain course. With a course, you’ll be able to study from industry experts and learn in a step-by-step manner through the curriculum. 

At upGrad, we offer the following two courses in blockchain technology:

• Executive PG Programme in Software Development- Specialisation in Blockchain
• Advanced certificate program in blockchain technology

We offer both of these courses in partnership with IIIT-B. They are online and cover the basic and advanced concepts of blockchain. 

You can join any one of these courses depending on your career goals and requirements. They equip you with the necessary skills so you can enter the industry as a blockchain professional. 

Conclusion

Congratulations! You are now familiar with the basics of blockchain and have completed our blockchain tutorial for beginners. 

Blockchain is certainly one of the most versatile and useful technologies currently available and now is the best time to enter this sector. We recommend checking out the blockchain courses if you’re interested in becoming a blockchain professional.

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