Update March 19, 2018
A new way to learn about blockchain: Experiment with a blockchain network (free beta!) with the IBM Blockchain Platform Starter Plan.

You’ve probably heard of blockchain. It’s hard to navigate much of the web today without running across some kind of reference to it. After a while I thought, “Could I really explain blockchain to someone if asked?” and if you’re in the same boat as I was, this post is for you.

The Problem

Any technology is useful only if it solves some business problem, and blockchain is no exception. There are several problems blockchain solves.


When two parties execute an agreement, there are several moving parts. But what makes the transaction efficient is trust. If you agree to buy X number of widgets from me at a certain price, and we have established trust, the transaction goes smoothly. If not, then it gets complicated at best, and litigious at worst. There are many factors that establish an inherent trust like

•    Reputation – If you are a reputable vendor, I am more likely to trust you.

•    History – If we’ve been able to trust each other in the past, we are more likely to trust each other in the future.

Establishing trust between two parties can be very difficult, time consuming, and largely subjective (you can’t really quantify “reputation,” for example), and the larger the network involved in a transaction, the more difficult it is.


In our fictional deal, you have your ledger to record various aspects of the transaction and I have mine. But I don’t see your ledger and you don’t see mine. Thus, by its nature, the deal is opaque, so we will probably have a contract to govern the terms of the deal. And other than the terms of the contract, that’s as transparent as the deal gets.

Since there is no transparency, it’s difficult to tell how things are going until the deal is done.

What happens if something goes wrong? Let’s say I don’t hold up my end of the deal (or vice-versa)?


To ensure the deal goes smoothly, you and I will probably deal with middlemen:

•    Lawyers – To draw up a contract, and if necessary, to provide legal services should things get litigious.

•    Accountants – To keep the ledgers, and ensure the exchange of goods (and money) goes according to the contract, and is properly recorded.

•    Government – In some industries, there are government regulations and oversight mandates and other guidelines that have to be followed.

What blockchain is NOT

If you’re like me, the first time you ever heard about a “block chain” it was in the context of Bitcoin. Bitcoin is the first implementation of blockchain technology. Bitcoin is an electronic currency that was created to solve the problems of trust, transparency, and accountability between two parties in exchanging money for goods and services over the internet.

The Bitcoin blockchain is a public, distributed ledger of all Bitcoin transactions that have ever taken place. This ensures that everyone who participates in the Bitcoin network has access to all transactions, and thus everyone agrees on how every one of those transactions took place. Furthermore, the ledger (blockchain) is immutable, so nobody can change it.

Since the Bitcoin blockchain is distributed among all participants in the Bitcoin network, it relies on no centralized authority. And through the use of cryptographic technology, all transactions are anonymous.

The Solution

Bitcoin is a disruptive – and arguably revolutionary – technology that relies on blockchain technology. But the blockchain we are hearing about nowadays takes it much further. While Bitcoin is a crypto-currency ensuring transparency and accountability of financial transactions, blockchain technology can be applied to many other types of transactions to solve the problems inherent in any transaction.

Blockchain technology is used in a peer-to-peer network of parties, who all participate in a given transaction.

At its core, blockchain technology uses a distributed ledger that is visible to all parties involved in the transaction. Through a consensus mechanism, the ledger is guaranteed to be consistent. Because the ledger is distributed, everyone involved can see the “world state” at any point in time and can monitor the progress of the transaction.

Through the use of cryptographic technology, the ledger is encrypted so that only parties allowed to view it may do so.

By its very nature, Blockchain tackles all of the problems inherent in a business transaction:

•    Trust – Through the use of blockchain, all the parties involved in a transaction only have to trust the technology.

•    Transparency – Because the ledger is distributed, all peers involved in the transaction network can view it (subject to security rights, of course).

•    Accountability – Since all parties in the transaction can view the distributed ledger, everyone can agree on how the transaction is progressing while it is ongoing, and how it went once it is complete.



Initially, blockchain technology was more concept than reality. Enter Hyperledger!

The Hyperledger is an open source, collaborative effort hosted by the Linux Foundation, to advance cross-industry blockchain technologies. Its community is composed of leaders across many industries including finance, Internet-of-Things, technology, and more.

One of its community-based projects is Hyperledger Fabric, a blockchain framework for business applications, to which IBM contributes code. Hyperledger Fabric uses container technology to enable “smart contracts,” which are implemented in “chaincode” that allow network members to create and manage assets involved in business transactions, and to create and manage the transactions as well.

The Bottom Line on Blockchain Technology

Blockchain technology has the potential to revolutionize the way business networks operate. By establishing trust, and providing transparency and accountability, blockchain makes the network and transactions more efficient. More efficient means faster turnaround, increased profits, and happier customers.


Learn more about Blockchain and Hyperledger





20 comments on"What is blockchain? A primer on distributed ledger technology"

  1. So great!! Thank for sharing

  2. […] blockchain — of which the Bitcoin digital currency is a proof-of-concept — is a technology used in a peer-to-peer (P2P) network of parties that participate in a given transaction. It uses a distributed ledger visible to all parties […]

  3. […] blockchain — of which the Bitcoin digital currency is a proof-of-concept — is a technology used in a peer-to-peer (P2P) network of parties that participate in a given transaction. It uses a distributed ledger visible to all parties […]

  4. I truly appreciate this post.Really looking forward to read more. Fantastic.

  5. It very clearly, thanks for sharing

  6. Good concept based article on Block Chain Technology and its utilisation in business.

  7. excellent write up elaborated the technological concept in a manner which a new comer can understand and relate easily. very useful & precise article on the subject.

  8. Thank you so much for this. I am amped to begin making blockchain apps. This was very straightforward and easy to understand.

  9. Thanks for this – I am just starting to understand a bit.
    My first question is whether blockchain network members all have to participate in transactions between a small subset of the members. You say this is true for bitcoin, but is it true for tracking – for example – the shipping trail of a pork chop from farmer to kitchen?
    Probably this is discussed some where, but I am trying to understand what a blockchain node is and who is able to use the node for doing transactions – independent of bitcoin.

    • Hi Jon, thanks for your question. My statement was not super clear, my apologies. What I mean by all parties participating in a blockchain network is that they *can* participate, because blockchain is de-centralized. That’s all. Think of a blockchain node and peer as synonymous (this may not be 100% the case depending on a multitude of factors, but it’s a good start).

      If you want to get down in the weeds, then we have to start talking about the exact software stack used to drive the blockchain. If we’re talking Hyperledger Fabric for instance, then a peer node is where transaction processing occurs. Check out this link to learn more about Hyperledger Fabric, and how a HLF network might track your example pork chop: http://hyperledger-fabric.readthedocs.io/en/release-1.1/txflow.html.

      Thanks for reading!


  10. rajesh gvk April 12, 2018

    what does block chain committing node look like code wise ?.

  11. Is all the participants within the network can see all kinds of transactions? For example, If there are 5 participants within the network, can any one participant see all other 4 participants transactions or he/she is restricted to his/her own transaction

    • Hi Vinutha, thanks for your question. In a permissioned (or private) network, the permissions control what the participants can see. In your example, the 5 participants would be setup by the Membership Service Provider (MSP) to see those transactions that match their role(s), and their own, of course.

      So the answer is: it depends on how the network is set up.

      Contrast this with a public blockchain (like Bitcoin) where every participant can see every transaction.

      I hope this answers your question. Thanks for reading!


  12. Really good post and info… WHEN we say transactions done/entered can’t be altered/changed (immutable), in scenario where due to Human error if wrong data/transaction has been entered, how it can be rectified/reversed ?

    • Hi Rajneesh, thanks for your question. Once a transaction has been committed to the blockchain, it is there forever. If a transaction has been committed in error (this situation is unavoidable), another (separate) transaction would be committed to correct it.

      Otherwise, who would ever trust a blockchain that can be modified? A modifiable blockchain is a hackable blockchain. No level of admin access should ever give the ability to modify a committed blockchain transaction.

      Glad you enjoyed the post, thanks for reading!


  13. For blockchain to work, all participants must have real-time visibility to the same identical set of blockchain data. If blockchain is distributed, how are the issues of transaction concurrency addressed when overlapping assets are involved? Sorry if this sounds simplistic but I’m trying to understand blockchain from a relational database point-of-view.

    • Agreed. Without a consistent ledger, there is chaos. The blockchain infrastructure has an orderer component that determines the order in which transactions for the current block will be invoked. When consensus is reached for transactions for the current block, they are committed to the ledger, and the ledger is pushed to all participants (the exact details of the orderer, consensus, and ledger update are specific to the blockchain solution in use, I’m trying to describe your very broad question in a general way).

      You sort of threw me a curveball there at the end with the relational database thing. Blockchain is not a relational database, so I caution you not to try to understand it from that point of view. If you’re interested, check out this article on blockchain versus database: https://developer.ibm.com/code/2018/04/16/blockchain-vs-or-database-better/.

      Thanks for your question, and thanks for reading!


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