Article By Ian Sherratt, Services Director – Cloud Centres

Blockchain is becoming increasingly accepted and used by companies – and nations – around the world. But what is blockchain and how does it work?

You can’t fault the ambition: His Highness Sheikh Mohammed bin Rashid Al Maktoum wants to make Dubai the happiest city on earth. How does he plan to do this? Not with pay rises but by making Dubai the first city fully powered by blockchain.

The strategy to achieve these ambitions will use three strategic pillars: government efficiency, industry creation and international leadership.

The Dubai Blockchain Strategy looks to deliver “more seamless, safe, efficient and impactful city experiences” by exploiting the latest technology innovations, according to Smart Dubai [].

Smart Dubai says that blockchain technology stands to unlock dirham 5.5 billion in savings annually in document processing alone in Dubai — equal to the one Burj Khalifa tower. The Dubai Blockchain Strategy establishes a roadmap for the introduction of blockchain technology for Dubai and the creation of an open platform to share the technology with cities across the globe.

Whether this strategy comes to fruition and the residents of Dubai do get to be the happiest citizens in the world remains to be seen, but it shows how the potential of blockchain is exciting people across the globe.


What is blockchain?

Yet many people still don’t understand what blockchain is. In its most basic form, blockchain is literally just a chain of blocks strung together, although in this case the blocks are digital information and the chain is a public database, in which the blocks are stored.

Blocks are made up of three pieces of digital information. Firstly, it has data on a transaction, such as when and where it was made and the value of it. Secondly, it records the parties involved in the transaction. Finally, it contains information that makes it unique – a cryptographic code called a ‘hash’, which is created by an algorithm. This is how transactions that may be identical in other ways can be recognised from each other.

How does blockchain work?

When new data is saved in a block, it is added to the blockchain. Four types of data are needed for a block to be added to the blockchain.

In the first instance, a transaction has to occur – such as a purchase from an online retailer. Then, the transaction has to be verified. This is done by a network of computers that check that the transaction has happened in the way it was recorded – such as time, date and value and who was involved.

Once this has happened, the transaction – including the participants and their digital signatures, value, date etc – is stored in a block. It then joins probably thousands of others just like it

Finally, the block is given a hash. Once all the transactions in a block have been verified, it will be given a unique hash, and will then be added to the blockchain. After it has been added, it is publicly available to view by anyone.

Is blockchain secure?

As with any online system, one of the first questions asked is how secure it is. In blockchain, new blocks are always added to the end of the blockchain. Once added, it is difficult to go back and alter the block as each one contains its own hash, so if the block it edited the hash changes too.

This means that if a hacker attempts to change the data in a block – such as the financial value of a transaction – the block’s hash changes. But the next block in the chain still has the old hash, which the hacker would also need to change to hide their work. But doing that would change that block’s hash as well, and so on. So the hacker would have to change every subsequent block in the chain, which isn’t feasible.

Another security feature of blockchain networks is the tests that computers that want to add blocks to the chain have to pass. This takes the form of solving a complex computational maths problem: a problem so difficult it requires the running of powerful – and expensive – programs. This makes it difficult for any would-be hackers.

How useful is blockchain?

Blockchain has many uses. Not only does it store data about financial transactions, as described above, it can also store data about other things, such as property exchanges, votes in an election or healthcare records. It is also the bedrock of cryptocurrencies such as bitcoin, where they can run without a central authority, which traditional currencies have.

Increasing numbers of businesses are also using blockchain. A 2020 survey of more than 1,400 companies by Deloitte found that 39% have a blockchain system in production. Meanwhile, 36% of respondents said they were planning to invest $5 million or more in blockchain in the coming year.

These statistics show that blockchain is becoming increasingly popular and will continue to do so as more organisations realise the potential of it.


Deloitte (2020) Blockchain networks have implemented tests for computers that want to join and add blocks to the chain. Available at: Last accessed: 15/11/2020

Blockchain Explained – Podcast #011

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