What is blockchain? Why is it important?

By | March 15, 2022

Where is all your digital data stored? On the servers of big tech-giants. Blockchain changes that. A blockchain is basically a distributed database, which is not held in any one place or managed by any one entity. It is a public record of transactions/assets, managed by multiple participants that can be located anywhere in the world.

The records, called blocks, are linked in a chronological order to one another. Each block contains the data, a timestamp, and a hash with which it is joined with the previous block.

The blockchain is immutable, which means that once deployed on the chain, the records (blocks) cannot be changed. This could also be a problem as if there is an error, you cannot correct it. You have to create a new block with the correction and both the blocks will be available.

Where is the data on the blockchain stored?

Nodes. The blocks of data on a blockchain are stored on nodes.

What is a node?

A node is an equipment connected to a network. If you have one laptop, two phones, one router on your home network, you have four nodes.

In a blockchain, each node serves as a small server and these nodes are constantly connected to each other. If one of them goes offline, it will still be updated with the latest data on connecting with the network.

However, not all nodes are equal:

Mining nodes or Miners:  Miners are responsible for approving new transactions and adding new blocks to the blockchain. They sacrifice computing power to validate the transactions and add them on top of the previously existing chain.

Full Nodes/Parent Nodes: These are responsible for holding the blockchain ledger and distributing it to other nodes when required.

It is called a Super Node if there are a lot of connections in and out, it operates around the clock, and is publicly available.

Light Nodes/Thin Nodes are also similar but they hold only a portion of the blockchain ledger and are used to back the full nodes in case of a breach.

What is the importance of blockchain?

When a lot of data is kept with big organizations, they control it and use it to drive profits to themselves and raise their stock price.

Consider this: Google has a huge database of websites. They are dependent upon the webmasters to serve any content but Google alone drives any profits from its operations. They also have too much power. One day they can decide we want to show only the websites that load within 5 seconds, and the webmasters have to all follow the directions and adjust their websites. Even then, Google will not give them the coveted top spot on the SERPs because the precious top fold is sold to the businesses that pay them the highest in PPC.   

However, blockchain allows for more trust, transparency, and security as the data is distributed and not controlled by a single organization or individual.

The 3 most important properties of a blockchain are:

  1. Decentralization
  2. Security
  3. Scalability

How it achieves these:


Unlike the databases controlled by Governments or large corporations (Facebook, Google, telecom operators) on a small number of ‘centralized’ nodes, the blockchain is run by many nodes located across the world. Hence, the decentralization.

The distributed nature of the blockchain based on the power of the collective makes it much more attractive than the current systems of individual power.


After every transaction, the full nodes are updated with the latest version of the blockchain, containing the entire history. Now, if this was only one node, it would be extremely vulnerable. But the blockchain runs on many nodes distributed across the world, which means that the data is spread across so many devices and is much safer from attacks.

If one of the full nodes is hacked and the ledger is violated, the light nodes can dismiss that node, and it can later be corrected with the updated data from any of the other full nodes.

Even if some of the nodes are corrupted or broken for a while, the blockchain will remain correctly operational with the others.

Security and decentralization are the two most important properties of any blockchain.


Is the ability of the blockchain to handle more transactions in less time. This is measured in transactions per second (TPS).

There are too many challenges to scaling a blockchain, given the infrastructure requirements as every node needs to store a massive amount of information and every transaction needs to be transmitted to and validated by multiple nodes.

In addition, it is expensive as the miners must be paid for validating these transactions and this fee is born by the users.

The scalability of blockchain and its limitations merit a page of their own, so we will come back to it again.

The blockchain is hard to escape and for all its complexities, it is also a technology with a lot of potential to revolutionize the current system with decentralized record keeping.

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