Introduction to the Formation of Online Currencies for New Learners:

Blockchain technology can be a complicated concept to comprehend. But with the right words and easy to understand method, anyone especially those who are new to bitcoin blockchain can know everything there to know about blockchain technology. 

Blockchain is a record that contains all the information about the transactions between cryptocurrencies. A distinctive feature about the blockchain is that it cannot be altered or forged by any user making it uniquely secure. The information that is stored in this ledger is very important since every flow of fund is recorded in the

To further understand let’s get to know about some essential functions of the blockchain. 

Hash Function 

An example of 5 people and their exchange of currency can be taken to bring concepts into understanding. This currency that they are using is produced by themselves. They write everything down in a record book and keep this information open between the 5 individuals. We shall call them person A, person B, person C and so on. Person A is the one who keeps the record with him.

So the ledger will look something like this: 

Person A gave 5 coins to person C

Person C gave 4 coins to person B

Person B gave 7 coins to person E

Person E gave 2 coins to person A

Person D gave 2 coins to person F

Person F gave 2  coins to person D

But one of them, Person B decides to tamper with the ledger and change the entrees and steal the money. When person A notices that changes have been made and the money is stolen by someone he decides to make a program that turns texts into numbers and alphabets, creating a coded version of the entry. This is called Hash Function. It creates a string of numbers and alphabets of every entry made in the notebook. But person B manages to decode the hash, change it into a completely new one and steal the money again. 

Person A notices this and decides to even more complicate the records by generating a hash, including the previous hash. This means that every entry made in the ledger will depend on the last hash. Now person B will have a hard time trying to change the entries. 


But let us suppose that person B is desperate for more money so he spends more time figuring the previous hash and the new ones so that he could interfere and change the entry once more and he succeeds. Now person A has to come up with a different method to secure the records and so he decides to add a number after each record entry. This number is called a nonce. Nonce has to be added carefully so that the generated hash could end with double zeros. If person B wants to steal and forge the ledger, he will a challenging time figuring out every digit and hash functions. 

But this also made records very lengthy, complex and problematic for person A to manage also. 


Nodes are computers that can check through the nonce and allow access to the transactions by approving them. Person A created a thousand number of transactions in his ledger and then made it in a spreadsheet. Every time he completes a thousand transactions, he makes a spreadsheet. He sent these spreadsheets to a thousand computers or nodes everywhere in the world. Every node checks the validity of the transaction and then forwards it in the record of the transaction. If someone such as person B tries to change the entry the nodes will verify it before and will not grant access to change it. 


The spreadsheet that person A created above is called a block. The block has a preset limit of transactions that can be recorded in it. After the limit has been reached, another block is created and linked forming a chain of a block. This presents the term blockchain. There is a copy of the blockchain on every node and that keeps updating itself every 10 minutes. It is an automatic update that occurs in every part of the world that the node is housed. New entries of the transaction can only be added to the database but no transaction can be altered or forged. 

Key takeaways: 

  • Blockchain is a kind of spreadsheet containing information about transactions of cryptocurrency.
  • Every transaction needs to be entered in the order. 
  • The transaction needs to be approved by the nodes for it to become a part of the block.