October 3, 2021

Darko Simunovski content is written in English. Translations into other languages are automated and there may be minor text errors.

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In order to understand blockchain, it is instructive to see it in the context of how Bitcoin implemented it. Like a database, Bitcoin needs a set of computers to store its blockchain. For Bitcoin, this blockchain is just a specific type of database, which stores every Bitcoin transaction ever made. In the case of Bitcoin, and unlike most databases, these computers are not all under one roof and each computer or group of computers is managed by a unique individual or group of individuals. Imagine that a company has a server consisting of 10,000 computers with a database containing all of the customer’s account information. This company has a warehouse of all of these computers under one roof and has full control over each of those computers and all of the information they contain. Likewise, Bitcoin is made up of thousands of computers, but each computer or group of computers that contains its blockchain is in a different geographic location and they are all managed by separate individuals or groups of people.

These computers that make up the Bitcoin network are called nodes. In this model, the Bitcoin blockchain is used in a decentralized manner. However, there are private and centralized blockchains, where the computers that make up its network are owned and operated by a single entity.

In a blockchain, each node has a complete record of the data that has been stored on the blockchain since its inception. For Bitcoin, the data is the complete history of all Bitcoin transactions. If a node has an error in its data, it can use the thousands of other nodes as a point of reference to correct itself. This way, no node in the network can alter the information it contains. For this reason, the transaction history in each block that makes up the Bitcoin blockchain is irreversible. If a user tampers with Bitcoin’s transaction log, all of the other nodes cross paths and easily locate the node with the wrong information. This system makes it possible to establish an exact and transparent order of events.

For Bitcoin, this information is a list of transactions, but it’s also possible that a blockchain contains a variety of information such as legal contracts, status IDs, or a company’s product inventory. To change the operation of this system or the information stored in it, the majority of the computing power of the decentralized network would have to agree on these changes. This ensures that any change that occurs is in the best interests of the majority.



Due to the decentralized nature of the Bitcoin blockchain, all transactions can be viewed transparently by having a personal node or by using blockchain explorers that allow anyone to view transactions live. Each node has its own copy of the chain which is updated as new blocks are confirmed and added. This means that if you want you can track Bitcoin wherever it goes. For example, exchanges have been breached in the past where those who held Bitcoin in the exchange lost everything. Although the hacker can be completely anonymous, the Bitcoins they have mined are easily traceable. If the Bitcoins that were stolen in some of these hacks were to be moved or spent somewhere, it would be known.


Blockchain technology takes security and trust concerns into account in several ways. First, new blocks are always archived in a linear and chronological fashion. That is, they are always added at the “end” of the blockchain. If you take a look at the Bitcoin blockchain, you will see that each block has a position on the chain, called ‘height’. As of November 2020, the block heights had so far reached 656,197 blocks. Once a block has been added at the end of the blockchain, it is very difficult to go back and change the contents of the block unless the majority has reached a consensus to do so. This is because each block contains its own hash, as well as the hash of the previous block, as well as the previously mentioned timestamp.

cryptographic hash on each block

Hash codes are created by a mathematical function that transforms numeric information into a string of numbers and letters. If this information is changed in any way, the hash code also changes. That is why it is important for safety. Suppose a hacker wants to modify the blockchain and steal Bitcoin from everyone. If they were to edit their own unique copy, it would no longer line up with everyone’s copy. When everyone crossed their copies, they would see that copy stand out and the pirate version of the channel would be dismissed as illegitimate.

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