If you’re reading this guide, you’re probably wondering what blockchain is and why there’s been a lot of talk over the last few years about. Although blockchain rose to popularity on the power of the world’s first cryptocurrency, Bitcoin, the technology has morphed into an enterprise-worthy platform that is disrupting industries in ways not seen since the arrival of the internet.

In this guide, you will learn the following:

  • What a blockchain is
  • Blockchain architecture
  • Type of blockchain architecture
  • What problems blockchain solve
  • Why blockchain will continue to be important in the future

What is a blockchain?

A blockchain is simply a new method of data storage in that it allows digital information to be distributed to a cluster of computers not owned by any single entity. To be more detailed, it is a decentralized ledger that keeps a record of each transaction that occurs across a fully distributed or peer-to-peer network, either public or private.

In other words, a blockchain is essentially a network that holds the list of all events and transactions entered onto it, which is held simultaneously by everyone on the network. The network has no central authority, making it the very definition of a democratized system. Each peer carries a copy of the ledger and each transaction is verified by the majority of participants of the system.

Moving further, the word blockchain is fusion of two words: a block and chain. This helps to form a simple picture of what the network is about in that it is a chain of blocks. The block contains information that is added to it over time and each block is built on top of the last and includes a piece of information that links back to the previous one.

Because one block is linked to another, there is very little risk of hacking or cheating the system as it would be immediately obvious it has been tampered with. For hackers to tamper with a blockchain network, they would have to manipulate every block in the chain across all of the distributed versions of the chain.

Infographic of how a Blockchain work
Infographic of how a Blockchain work

Anything of value like land assets, cars, currencies etc can be recorded on blockchain as a transaction.  Although scientists proposed blockchain technology in 1991, it was first launched in 2009.

Blockchain architecture

Now that we have covered what a blockchain system is, let’s move on to blockchain architecture, which implies its various components. The three main components of the blockchain architecture are:

  • Blocks
  • Transactions
  • Consensus


As stated earlier, blocks are a critical part of the network in that they are structures in which data is stored. The data stored within the block is determined by the blockchain type. For example, the blocks in the Bitcoin blockchain contain information about the sender, receiver and amount of Bitcoins exchanged.

The first block in the network is referred to as the genesis block and this is because there is no block preceding it. All other blocks are arranged in a linear fashion such that the newest block is attached to the previous one.

Apart from the data of the transaction in each block, other components in the block are the hash and the hash of the previous block. A hash can be likened to a fingerprint because it is unique to each block. The hash is used to establish the authenticity of each block and determine whether or not it should be added to the chain.

The hashes used in blockchains are distinct as they cannot be replicated. It is virtually impossible to find two pieces of data that give the exact same hash output. Any attempt to modify the information within the block, will result in a chance of the hash value, triggering warning so that other blocks do not accept it.What makes blockchain very secure is that each block contains the hashes of previous blocks, making it tamperproof.


This is the original purpose for the blockchain system and without it; there would be no need for a blockchain network. A transaction occurs when a peer sends information to another peer.

When a transaction is carried out, the details are recorded on a block on the network, thus changing the state of the block. Because a blockchain is a decentralized network, the block will have to be updated on the entire nodes. Nodes in this regard are the machines connected to the network, store copies of the ledger, and share information with other machines.


Ever heard of the Byzantine Generals Problem? The Byzantine Generals Problem is an allegory that was conceived in the 1980s, which describes a situation where all the parties involved must agree on a single strategy to avoid failure.

Picture a handful of army generals surrounding strategic points of a city and looking to invade it. The problem is that the attack must be carried out at the same time and the generals can only communicate via a messenger because they are so apart.

If one of the army general attacks while the others think a retreat is the best solution, the battle may be lost. Similarly, if an army general thinks a retreat is a good decision but others think that an attack is the best course of action, they may be unable to pull off a successful attack.

There’s also another issue to consider; which is the possibility that the messenger may be caught by the opposing army and replaced with another messenger to deliver a false message.

The Byzantine Generals Problem makes for an excellent fundamental example of how an agreement is important to prevent failure. A blockchain must have a specific consensus algorithm to enable the nodes to work together and to keep the ledger secure.

Thus, a consensus mechanism can be simply referred to as the method through which every transaction is validated. There are different consensus mechanisms but the most popular are Proof of Work (PoW), the Proof of Stake (POS) and Delegated Proof of Stake (DPoS.)

  • Proof of Work: This involves miners (known as nodes) who solve complex mathematical problems to produce a new block
  • Proof of Stake: This is based on the participant’s coin stake and the more coins a staker has, the more likely that they will add a new block to the blockchain
  • Delegated Proof of Stake: This is a variation of PoS in that coin holders can stake their coins and elect a list of delegates to be possibly create a new block.

The above consensus mechanisms are the most popular. For instance, Bitcoin uses Proof of Work; Ethereum 2.0 uses Proof of Stake while EOS and Tron use Delegated Proof of Stake. Other consensus mechanisms include proof of capacity, proof of elapsed time, proof of identity, proof of authority, proof of activity etc.

Image displaying top 10 Blockchain projects based on market cap
Top 10 Blockchain protocols by Marketcap

Different types of blockchain architecture

Now that we have covered the different components of blockchain architecture, the next thing to know is the types of blockchain architecture.

Public blockchain

This is the most popular blockchain architecture as it allows anyone to participate in the network. The major characteristic is that there is no requirement for participation. All it takes is to have a smartphone and an internet connection, and you will be able to view transactions on the ledger.

However, this is not to say that the private details of each transaction are available to anyone as there is still some decent level of privacy. Bitcoin is an excellent example of a public blockchain. Other popular examples are Litecoin and Ethereum.

Private blockchain

A direct opposite of a pubic blockchain, this type of architecture has a set of rules regarding who can see and interact with the blockchain. As a result, not everyone can access the blockchain network.

A private blockchains is not a decentralized network because there is a clear hierarchy that dictates how it runs and who can access it. This type of blockchain might seem to be redundant but it is better suited to enterprise settings where organizations can develop their own blockchain without making it accessible to the public.

Consortium blockchain

This type of blockchain combines the features of public and private blockchains. The visibility of the blockchain is dictated by the validators and is viewable only to authorized persons. It is heavily controlled but is also great for multiple companies that operate in the same industry and require a common ground to carry out transactions.

What problem does the blockchain technology solve?

One of the most popular questions about blockchain technology is about what it can solve. Here are a few problems that blockchain is attempting to solve.

Cross-border payments

One of the biggest problems that blockchain solves is that of international payments. Making cross-border payments in the traditional banking system is a multistep process that involves a lot of intermediaries, which takes a lot of time and requires a hefty amount of money to process.

With blockchain, international payments are easy since funds can be instantly transferred from one peer to another. The fees are minimal and the irreversibility of the transactions allows for better security and accountability. Blockchain is the technology powering the rise of Decentralized Finance (DeFi) movement to eliminate middlemen as seen in the traditional banking system.

Data security

One of the major data problems that rock the corporate world is that of data loss either due to a security breach or failure of hardware. If there is no recent backup, the data may be lost permanently and this may grind the operations of any enterprise to a halt.

With blockchain, this ceases to be a problem as data can be stored on it and there is no need to reliance on a single central entity or location. The blockchain technology is tamperproof and can always be accessed from a mobile device with an internet connection.

Supply chains

Generally, supply chain management can be quite complex since a significant number of products undergo dozens or even hundreds of steps before they reach their final destination. The entire process involves an array of entities involved in the extraction of raw materials to the manufacturing and down to the distribution.

Blockchain can help improve assets recording, tracking, assigning, linking, sharing and more, which in turn helps to reduce any conflict and delay.

Intellectual property

A big challenge for big media houses and solo creatives is the inability to protect their rights in this digital age. This has resulted in the loss of billions of dollars annually due to copyright infringement. Blockchain is helping to fix this challenge, thanks to the rise of NFTs.

Fully known as Non-Fungible Tokens, NFT allows owners of intellectual properties to digitize their work and store it on a blockchain. Ownership of works of art can then be sold digitally and certificates issued to authenticate the ownership of a digital asset.


Many countries are plagued with controversy about justice of elections as accusations of voting machine hacks, voting misconducts and more are rife. A blockchain voting system can help solve this problem since all votes can be tracked in real-time and the results can never be changed.

Why we think blockchain technology will be important in the future

The blockchain technology has continued to draw attention since it was first launched as the underlying technology of Bitcoin in 2009. Experts believe that blockchain will continue to rise in popularity as we discover more use cases for the technology.

The blockchain has garnered wide acceptance and will remain important in the future because it enhances trust. Here are some attributes through which blockchain builds trust:

  • It is a distributed ledger, which all transactions are recorded on copies of the ledger on the nodes connected to the blockchain network.
  • It is secure and tamperproof.
  • It is transparent as everyone can verify transactions without the need for mediators.
  • It is consensus-based, meaning all participants must agree that a transaction is valid.


Blockchain is one of the most talked-about technologies in the world right now as more and more companies are adopting it into their businesses. The technology has the potential to solve a variety of problems that plague stakeholders in different industries and ultimately create opportunities across them.

Although there are many applications of blockchain already, many experts agree that its full potentials likely remain to be discovered.