Unpacking the Essentials: A Beginner's Guide to Blockchain Terms
Written by  Daisie Team
Published on 7 min read


1. What is Blockchain?

2. Key Blockchain Terms

3. Cryptocurrencies and Blockchain

4. Blockchain Applications

5. Getting Started with Blockchain

Embarking on your journey into the world of blockchain can be both exciting and a little overwhelming. With so many new terms and concepts to learn, it's essential to have a solid understanding of the basics. That's where this beginner's guide comes in—it's designed to provide you with a strong foundation in blockchain terms, so you'll be able to confidently navigate this fascinating world.

1. What is Blockchain?

At its core, blockchain is a decentralized digital ledger that securely records transactions across multiple computers. By distributing data across a network of computers, it ensures that no single entity has control over the entire system, promoting transparency and reducing the risk of fraud. Let's dive deeper into the fundamentals of blockchain:

Understanding Blockchain

A blockchain consists of a series of blocks, each containing a set of transactions. When a new transaction occurs, it's added to the most recent block. Once a block reaches its maximum capacity, a new one is created and linked to the previous block, forming a chain of connected blocks. Some key features of blockchain technology include:

  • Decentralization: Unlike traditional databases that have a central point of control, blockchain distributes data across a network of computers, called nodes.
  • Immutability: Once a transaction is recorded on the blockchain, it cannot be altered or deleted. This feature ensures the integrity of the data stored on the blockchain.
  • Transparency: Transactions on a blockchain are visible to all participants of the network, promoting trust among the users.

Benefits of Blockchain

Blockchain technology offers several advantages over traditional systems, some of which include:

  • Security: The decentralized nature of blockchain and the use of advanced cryptography make it difficult for malicious actors to compromise the system.
  • Increased efficiency: By eliminating intermediaries and automating processes through smart contracts, blockchain can streamline and speed up transactions.
  • Reduced costs: With fewer intermediaries and a more efficient transaction process, blockchain can help businesses save on operational costs.
  • Greater transparency: The visibility of transactions on the blockchain allows for greater accountability and trust between parties.

Now that you have a general understanding of blockchain, let's explore some important blockchain terms to further your knowledge.

2. Key Blockchain Terms

As you delve deeper into the world of blockchain, you'll encounter a variety of terms that are essential to grasp. In this section, we'll cover some of the most important ones to help you better understand and navigate the blockchain ecosystem.

Distributed Ledger

A distributed ledger is a shared database that records transactions across a network of computers, or nodes. Each node maintains a copy of the ledger, and any changes made to the ledger are updated and verified by consensus among the nodes. This ensures that no single entity can manipulate the data, providing a secure and transparent system.

Smart Contracts

Smart contracts are self-executing contracts with the terms of the agreement directly written into code. They automatically execute actions (like transferring funds) once specific conditions are met. This eliminates the need for intermediaries and reduces the risk of human error or fraud. Smart contracts are particularly popular on the Ethereum blockchain, which was designed to support the creation and execution of these digital agreements.

Consensus Mechanisms

A consensus mechanism is the process by which nodes in a blockchain network agree on the validity of transactions and update the distributed ledger. There are several different consensus mechanisms, each with its own benefits and drawbacks. Two of the most well-known mechanisms are:

  • Proof of Work (PoW): Used by Bitcoin, PoW requires nodes (called miners) to solve complex mathematical problems in order to add new blocks to the blockchain. The first miner to solve the problem is rewarded with cryptocurrency.
  • Proof of Stake (PoS): Unlike PoW, PoS doesn't rely on mining. Instead, nodes (called validators) are chosen to create new blocks based on their stake, or the amount of cryptocurrency they hold. The more cryptocurrency a validator holds, the higher the chance they have of being selected to create a block.

Understanding these key blockchain terms is crucial for navigating the world of blockchain and cryptocurrencies. Speaking of cryptocurrencies, let's explore some of the most popular ones and their connection to blockchain technology.

3. Cryptocurrencies and Blockchain

Blockchain technology serves as the backbone for various cryptocurrencies, which are digital assets designed to function as a medium of exchange. In this section, we'll discuss three major cryptocurrencies — Bitcoin, Ethereum, and Ripple — and explore their relationship with blockchain.


Bitcoin is the first and most well-known cryptocurrency, created in 2009 by an anonymous individual or group known as Satoshi Nakamoto. Bitcoin's blockchain is a public ledger that records all transactions involving the cryptocurrency. As mentioned earlier, Bitcoin uses the Proof of Work consensus mechanism, with miners competing to solve mathematical problems and add new blocks to the blockchain. In return, they receive a reward in the form of newly created bitcoins and transaction fees.


Ethereum is another popular cryptocurrency and blockchain platform, launched in 2015 by Vitalik Buterin. While it shares some similarities with Bitcoin, Ethereum's primary focus is on enabling the creation and execution of smart contracts and decentralized applications (dApps). Its native cryptocurrency, Ether (ETH), is used to power these smart contracts and dApps. Ethereum currently uses the Proof of Work consensus mechanism, but it plans to transition to a Proof of Stake system called Ethereum 2.0 in the near future.


Ripple is both a blockchain-based payment network and a cryptocurrency (XRP). Launched in 2012, Ripple aims to facilitate fast, low-cost, and secure transactions across borders. It's particularly popular among banks and financial institutions, which can use the Ripple network to settle transactions in real-time without relying on traditional intermediaries like SWIFT. Ripple uses a unique consensus mechanism called the Ripple Protocol Consensus Algorithm (RPCA) that doesn't require mining, making it more energy-efficient than both Bitcoin and Ethereum.

Now that you have a better understanding of cryptocurrencies and their connection to blockchain technology, let's explore some real-world applications of blockchain across various industries.

4. Blockchain Applications

Blockchain technology has the potential to revolutionize various industries by offering increased security, transparency, and efficiency. Let's take a look at three sectors where blockchain is making a significant impact: supply chain management, healthcare, and finance.

Supply Chain Management

Blockchain can greatly enhance supply chain management by providing a secure, transparent, and tamper-proof record of goods as they move through the supply chain. This allows for:

  • Improved tracking and tracing of products, reducing the risk of counterfeit goods.
  • Easier verification of the origin and authenticity of products, ensuring ethical sourcing and production practices.
  • Increased efficiency by automating transactions and eliminating the need for intermediaries.

For example, Walmart has been using blockchain technology to track the movement of food products from farm to store, helping to improve food safety and reduce waste.


In the healthcare sector, blockchain has the potential to revolutionize patient data management and sharing, leading to improved patient care and reduced costs. By implementing blockchain:

  • Medical records can be securely stored and shared among healthcare providers, ensuring accurate and up-to-date information is available for treatment.
  • Data privacy can be better protected, as patients can control who has access to their medical records.
  • Research and clinical trials can benefit from secure, tamper-proof data collection, leading to more reliable results.

An example of blockchain in healthcare is MedRec, a project developed by MIT researchers that uses blockchain to manage electronic medical records and improve data interoperability between healthcare providers.


The finance industry is one of the earliest adopters of blockchain technology, as it can help streamline processes and reduce costs. Blockchain can:

  • Facilitate faster, cheaper, and more secure cross-border transactions, as demonstrated by Ripple.
  • Enable the creation of digital assets, such as tokenized stocks or bonds, which can be easily traded on decentralized platforms.
  • Improve transparency and reduce fraud in financial transactions by providing a tamper-proof record of the transaction history.

One example of blockchain in finance is JPMorgan Chase's Quorum, an enterprise-focused blockchain platform designed to enable secure and efficient financial transactions.

With so many exciting applications for blockchain technology, you might be wondering how to get started learning more about it and even building your own blockchain projects. Let's dive into some resources to help you get started.

5. Getting Started with Blockchain

Now that you've seen some real-world examples of how blockchain can transform industries, you might be eager to dive in and learn more about the technology. Here are some resources and platforms to help you get started with blockchain and even build your own projects.

Blockchain Platforms

There are several blockchain platforms available for developers to create and deploy blockchain-based applications. Some popular platforms include:

  • Ethereum: A decentralized platform that enables developers to build and deploy smart contracts and decentralized applications (dApps).
  • Hyperledger: A collaborative project hosted by the Linux Foundation, Hyperledger offers various tools and frameworks for building enterprise-grade blockchain solutions.
  • Cardano: A research-driven blockchain platform that aims to deliver a more secure, scalable, and sustainable ecosystem for decentralized applications and cryptocurrencies.

Choosing the right platform depends on your specific needs and goals, so it's important to research each platform and understand its strengths and limitations before getting started.

Learning Resources

There are plenty of online resources to help you learn more about blockchain and develop your skills. Some valuable resources include:

  • Online Courses: Websites like Coursera, Udemy, and edX offer a wide range of blockchain courses, from beginner to advanced levels.
  • Books: There are numerous books available on blockchain technology, such as "Blockchain Basics" by Daniel Drescher or "Mastering Blockchain" by Imran Bashir.
  • Community Forums: Joining forums like Stack Overflow, Reddit, or the official forums of your chosen blockchain platform can help you connect with other developers, ask questions, and share your knowledge.
  • Tutorials and Documentation: The official websites of various blockchain platforms often provide detailed documentation, tutorials, and sample projects to help you get started.

By exploring these resources and experimenting with different blockchain platforms, you'll be well on your way to mastering blockchain technology and creating innovative solutions. Remember, practice makes perfect, so don't be afraid to dive in and start learning the ins and outs of blockchain terms and concepts.

If you found this blog fascinating and want to dive deeper into the world of blockchain, don't miss Sara's workshop, 'Unboxing Blockchain'. This workshop will provide you with a comprehensive understanding of blockchain technology and its potential applications in various industries.