What Is Blockchain: Yevhen Kasianenko Explains Blockchain in Simple Terms

Each block in the chain contains information about transactions and the hash of the previous block. Why is this important? The system guarantees the immutability, transparency, and security of data.

And most importantly — there is no central governing authority within the system. All information and data are distributed among users. This system is far more secure and reliable than traditional data protection mechanisms.

How does blockchain work?

Alright, let’s dive deeper into the system's working algorithm. First, I’ll explain the complex in a complex way, then we’ll simplify it. Ready? Here’s a step-by-step guide on how blockchain works:

Step 1. Creating a Transaction.

Let’s say we have a trader named Alex, and he really wants to transfer 10 BTC to his friend Bob (yep, not poor folks). Alex goes to an exchange or his crypto wallet, where he creates a transaction. To complete the transaction, he specifies the amount of coins and the recipient’s address.

A transaction in the network represents a record that contains the following information:

• Sender's address.
• Recipient’s address.
• Transfer amount (10 BTC).
• Sender’s signature. This is a unique digital signature that confirms the transaction was indeed created by Alex, not by a fraudster.

Step 2. Verification.

Once the transaction is created, it is sent to the blockchain network. There, it awaits verification from network participants called nodes. These nodes check:

• The sender’s signature. They need to ensure that the signature belongs to Alex and that he has the right to manage these funds.
• The sender’s balance. They check if Alex indeed has 10 BTC to transfer to Bob.

If the transaction is valid, it’s sent to the queue for inclusion in a block. This process takes seconds, not hours.

Step 3. Block Formation.

So, the transaction passed verification. What’s next? The transactions are grouped together and form a new block. The block contains the following information:

• A list of transactions. It includes Alex and Bob’s transaction, as well as other transactions awaiting confirmation.
• The hash of the previous block. This is a unique identifier that links the new block to the previous one.
• A timestamp or time code, which shows the exact time the block was created.

Step 4. Block Added to the Chain.

To add the new block to the chain, the nodes must reach a consensus. This is done using a consensus algorithm:

• Proof of Work (PoW):Nodes or miners compete to solve a specific mathematical problem. The one who solves it fastest adds the block to the chain and is rewarded with cryptocurrency.
• Proof of Stake (PoS): Participants stake their assets (stake). The larger the stake, the higher the chances that your block will be added to the chain.

Step 5. Updating the Ledger.

Once the new block is added to the chain, the entire network is updated. Every network participant gets a copy of the updated blockchain, now with the new block. Now, the whole network knows about Alex and Bob’s transaction.

Step 6. The Final Step.

The block has been added to the chain. The transaction between Alex and Bob is complete. Bob receives 10 BTC, and this information is forever recorded in the blockchain.

Simplifying the Complex: How Does Blockchain Work?

Still interested, but not entirely clear? Let’s simplify it with an example.

Think of blockchain technology as a massive book that every market participant owns. Each user can make their own entries (every transaction or action has its own entry and creates its own data block).

Other users can see it but cannot alter the data. Blockchain technology doesn’t allow them to change, rearrange, or delete anything.

Each block of data (an entry in the book) is linked to previous blocks (entries). If a user tries to break the chain’s integrity, others will immediately notice it.

Advantages of Blockchain

Now it's time to explore the advantages of blockchain technologies. It's clear they exist, given their popularity.

• As we’ve already established, blockchain technologies operate without a central governing authority. All information is distributed among participants. With this system algorithm, manipulation "from above" is simply impossible because there is no governing body.
• All user actions (authorizations, transfers, purchases, sales, signatures) are automatically recorded and appear in a common ledger. And yes, every other participant in the system can view them.
• Data already in the chain cannot be deleted; it’s simply impossible. This feature makes the technology an ideal option for working with data.
• The security of the entire system is built on unique data encryption systems known as cryptographic. Thanks to this method of data encryption, blockchain has become one of the most reliable systems in the world. 
• Tired of intermediaries and a bunch of third parties? Then blockchain can help you, as it completely eliminates the need for intermediaries, whether in Uzbekistan or the USA. There are no banks, no notaries, no unnecessary parties—just you and your partner. 
• Automatic execution of contract terms has been made possible thanks to smart contracts. They are what make the system so fast.
• Blockchain is versatile. You could say that its applications are limited only by your imagination and the development team.

Transparency and Security of the System

Let’s be honest; when the technology became publicly accessible, no one believed in it. The main argument was, “There’s no management, no company, no representation, and all users know everything about everyone!” But it turned out to be quite the opposite.

The transparency of the entire system and processes has become its main advantage. In traditional systems, data and information are hidden from the average user, while in blockchain, it’s the other way around. 

All network users can see both the transactions and the details about them.

• Each block in the chain contains a cryptographic hash. This hash is created based on the block itself. The hash protects the block from external changes.
• How does a new block appear in the chain? The mechanism may seem complex, but let me explain. All participants must come to an agreement or consensus. To achieve this consensus, two algorithms are used: Proof of Work or Proof of Stake. These algorithms are responsible for adding new blocks.
• In traditional data systems, information is stored on a server. However, blockchain distributes data among all participants. If any links attempt to hack or change, the overall network remains secure.

Resource Savings and Business Efficiency

Let’s not forget two key factors for businesses and projects: system efficiency and cost savings.

• Traditional bank transfers are not always convenient. Due to fees and additional checks, funds can take days or even weeks to reach an account. Blockchain allows you to bypass these limitations. A transfer takes no more than a few minutes.
• Process automation will enable you to reduce costs for documentation, legal services, and administration. The technology is used in the real estate sector, allowing for quick and easy property rights registration. 
• The impossibility of altering data in the chain has its advantages. Users can always be confident in the accuracy of information, significantly reducing costs for audits and additional data checks.

Integrating blockchain technologies enhances security, transparency, and contributes to cost savings. Because of these advantages, the integration of blockchain technologies is gaining popularity. Despite the higher initial cost of blockchain development, the project's operational expenses will be lower in the long run.

Need blockchain technology integration for your project? The K.I.S.S. Software team is ready to help. Our team consists of specialists in blockchain solutions for businesses.

Examples of Blockchain Use

As they say, from theory to practice? Let’s take a closer look at who, where, and how blockchain technologies can be used.

Financial Sector

I’ve already mentioned transaction speed, but it’s worth reiterating. Speed is crucial for modern business, and that’s where blockchain comes in.

Its integration can simplify the payment for goods and services and enhance financial management systems. But that’s not all.

• As I noted earlier, international bank transfers are slow and costly. Why not integrate blockchain to expedite the process and eliminate intermediaries?  Yes, there are fees when transferring crypto (which depend on the coin and the network, but that's another story).  The difference in transfer fees is evident: $0.50 or $500 (if using banking services).  
• Automate the execution of agreements between parties. Thanks to smart contracts, you can stop tolerating unnecessary intermediaries. Automate the systems for lending, insurance, and asset management.

Logistics and Supply Chains

In this niche, another important advantage of blockchain is operational transparency. You can track the entire supply chain of goods, allowing you to manage risks and maintain high-quality standards.

In the food industry, blockchain is used to monitor product quality, storage conditions, and delivery. 

Additionally, blockchain technologies aid in managing supplier relationships. How? You can monitor and analyze supplier performance, creating records of interactions with the product at various stages of the logistics chain.

Real Estate and Land Market

In the real estate sector, blockchain has been actively used for some time now. 

1. Blockchain allows assets to be divided into digital tokens, enabling fractional ownership of property.  

This means that without commissions and intermediaries, an investor can easily acquire a share in real estate (be it commercial property, residential buildings, or even land).

1. Smart contracts in real estate allow for the automation and acceleration of transactions. Imagine being able to buy property in just 2 minutes. Yes, literally in 2 minutes, as ownership rights will be transferred automatically.  
2. You can create a unified, secure, and fully transparent registry of property rights for land parcels.

Why Us?

Well, I’ve covered the basics of blockchain technology. To discuss all its potential applications, we could easily write several more long reads.

Blockchain is a functional and even revolutionary tool for business. Ignoring its capabilities means relinquishing your place in the global market.

If I’ve piqued your interest, it’s time to reach out to professionals. 

• The K.I.S.S. Software team consists of experts with many years of experience in digital solutions for businesses.  
• For each task, we form a dedicated team of specialists from various fields.  
• We guarantee an individual approach to every project.  
• We don’t just create turnkey digital products; we provide long-term support and updates.  
• We will always be in touch so that you can assess results and make timely adjustments.  

Working with K.I.S.S. Software ensures that your project will be implemented with consideration of all the requirements and nuances of your business. We help integrate blockchain into your business to fully unlock its potential.