What is Blockchain from the perspective of application scenarios?

Why does the world need blockchain?

Have you ever wondered why cryptocurrencies like Bitcoin and Ethereum attract the attention of millions of people worldwide? The answer lies in the core technology that underpins them—blockchain. This technology is far more than just a means to record virtual currency transactions; it is quietly changing our understanding of trust, security, and transparency.

Blockchain is essentially a decentralized digital ledger. Unlike traditional databases that are centrally managed by a company or government, the data in a blockchain is maintained across thousands of computers worldwide. This means that tampering with the information is nearly impossible—because you would need to change the data on the majority of the computers at the same time.

What is blockchain: Understanding from its essence

The simplest definition

Imagine the blockchain as a ledger that can never be altered. Every transaction you record in this ledger is protected by cryptographic technology, arranged in chronological order, forming an unbreakable chain. Once information is written, it exists permanently—even the creator of the ledger cannot change it.

Why is it called “block” and “chain”?

This name is very vivid. Each stroke or group of transactions is packaged into a “block,” like a page of paper. Each block is cryptographically linked to the previous block, forming an unbreakable “chain.” To modify a certain page of paper, one must rewrite all the subsequent pages—this is extremely difficult both technically and economically.

Core Features of Blockchain: Why It Is Unique

Decentralized Trust Mechanism

Traditional systems require a central authority (such as a bank) to verify your identity and transactions. Blockchain allows thousands of independent computers (which we call “nodes”) to vote together to decide. Without a single central power, there is no single point of failure — something traditional systems cannot achieve.

Permanent and transparent record

Most blockchains are public, and anyone can view all historical transactions. This transparency is particularly useful for supply chains—you can trace every step of a product from the factory to your hands. At the same time, transaction records cannot be altered once confirmed, and this immutability is crucial in fields such as finance, healthcare, and law.

Faster and cheaper transactions

International remittances usually take 3-5 days and the fees are quite high. However, using blockchain for cross-border transfers may only take a few minutes, and the cost is just a fraction of traditional banks. This is because it eliminates the intermediary.

How Blockchain Works: Technical Details Analysis

Step 1: Initiate and Broadcast Transaction

When Alice wants to send Bitcoin to Bob, she initiates a transaction. This transaction is immediately broadcasted to the entire blockchain network, and every node receives it.

Step 2: Transaction Verification

After a node in the network receives a transaction, it will check three things:

• Is Alice's digital signature authentic (ensuring it was issued by her)
• Does Alice's account have enough Bitcoin?
• Does the trading format comply with the rules?

This verification process uses public key cryptography—Alice has a private key (kept secret) and a public key (public). She signs transactions with her private key, and others can verify the signature is genuine using her public key. It's like signing with a private key and verifying the signature with a public key.

Step 3: Block Packaging

Verified transactions are not immediately added to the blockchain; instead, they are first collected and then wait to be packed into a block. Each block contains:

• All transaction data of this block
• A timestamp (records when it was created)
• A cryptographic hash value (the unique fingerprint of this block)
• The hash value of the previous block (this is the connection point of the “chain”)

Step 4: Consensus and Confirmation

This is the most critical step. Nodes in the network must reach a consensus on whether this new block is valid. There are two most common ways to do this:

Proof of Work (PoW)

Miners compete to solve a super difficult mathematical puzzle. The first miner to solve it receives a cryptocurrency reward, and other nodes verify whether the answer is correct. Bitcoin uses this mechanism. The downside is that it is particularly energy-intensive.

Proof of Stake (PoS)

There is no need to solve problems; instead, it is determined who creates new blocks based on the amount of cryptocurrency you have staked in the network. The more you stake, the greater the probability of being selected. If you act maliciously, the staked coins will be confiscated. Ethereum has already upgraded to this mechanism.

Step 5: Block on Chain

Once consensus is reached, the new block is permanently added to the chain. Now all nodes have a copy of this new block, and the ledger is updated.

Cryptography: The Secret Weapon of Blockchain Security

The reason blockchain cannot be tampered with is thanks to a technique in cryptography called hashing.

Imagine you have a piece of text “blockchain technology”. After processing it with the SHA256 hash function, it generates a string of garbled text. If you change one character to “blockchain technology1”, the generated hash is completely different. This is called the “avalanche effect”—a tiny change leads to a completely different output.

Moreover, it is impossible to reverse this string of garbled text back to the original text. Hashing is one-way.

This feature makes tampering almost impossible: if you want to change the data of a certain block, its hash will change, which will then not match the subsequent blocks. You would need to change all the following blocks. And these blocks are distributed across thousands of computers worldwide—you cannot hack the majority at the same time.

Real-world Applications of Blockchain

cryptocurrency trading

This is the most original and mature application of blockchain. Cryptocurrencies like Bitcoin and Ethereum utilize blockchain to provide a global transfer system without the need for banks.

Smart Contracts and DeFi

Smart contracts on Ethereum are self-executing code. When conditions are met, the contract executes automatically—without human intervention. Based on this, DeFi (Decentralized Finance) was born—lending and trading platforms without intermediaries like banks and financial institutions. These platforms manage the flow of funds through smart contracts.

Supply Chain Traceability

Suppose you bought a fish. With blockchain, you can see which boat it departed from, which docks it passed through, and what date it arrived at the supermarket. This is crucial for food safety and luxury goods anti-counterfeiting. Each link is recorded on the chain and cannot be forged.

Digital Identity and Healthcare

Your identity information, medical records, and other sensitive data can be stored on the blockchain - only those you authorize can view it. The information is both secure and not controlled by a single entity.

Voting System

Record votes using blockchain, with each vote having a unique cryptographic tag. The voting process is transparent, preventing duplicate votes and tampering with results.

Asset Tokenization

Real assets such as real estate, artworks, and stocks can be digitized into tokens for trading on the blockchain. This greatly enhances liquidity, allowing small investors to participate.

Different types of blockchain each have their own characteristics

Public Chain (Public Blockchain)

Anyone can join, and anyone can view all transactions. Bitcoin and Ethereum are public chains. The advantages are complete decentralization and transparency, while the disadvantages may include slower transaction speeds.

Private Chain (Private Blockchain)

Only authorized persons can enter. It is typically used by companies or organizations for internal management. It retains the immutable characteristics of blockchain but gives up decentralization.

Consortium Blockchain

A blockchain jointly managed by multiple organizations. It allows for the selection of who can view the data and who can participate in validation. This method is often used in interbank clearing systems.

Real Challenges Facing Blockchain

Although blockchain is powerful, it is not perfect. For example:

• Bottleneck: Ensuring security requires extensive validation, so transaction speeds are not as fast as traditional databases.
• Energy Consumption Issue: The PoW mechanism is particularly energy-intensive, leading to environmental controversies.
• Regulatory Uncertainty: Governments around the world are still studying how to regulate blockchain applications.
• Usage Threshold: Managing private keys and wallets remains complex for ordinary users.

Summary: Why Blockchain is Worth Paying Attention To

What is blockchain? It is a revolution about trust.

Traditional systems make us rely on a central authority. Blockchain replaces this trust with technology and incentive mechanisms — you don’t need to trust a person or a company, you just need to trust the code and mathematics.

From cryptocurrencies to supply chains, from smart contracts to digital identities, blockchain is showcasing its potential in multiple fields. Although the technology is still evolving and applications are still being explored, this decentralized, transparent, and secure recording system has already proven its value.

Blockchain has not only changed finance, but more importantly, it has given us a new way of thinking: how to establish a trustworthy and transparent system without central authority. The significance of this way of thinking goes far beyond the technology itself.