---
slug: "blockchain-basics"
topic: "blockchain basics"
title: "There are no bad questions about..."
description:
  "If you’re new to the blockchain, here’s everything you need to know to get
  started."
query: "wallet"
prevSlug: null
prevTopic: null
nextSlug: "nfts"
nextTopic: "NFTs"
---

_Welcome to No Bad Questions, a series that helps answer some basic questions
about blockchain, crypto, and web3._

For the last several years, you’ve probably heard quite a bit about the
blockchain… but it’s very easy to get lost. It can sound a lot like people are
speaking another language!

If you’re here, welcome — you’re taking the first step towards learning. This
guide will help you learn some of the basic blockchain concepts so you can start
participating in the future of the internet.

## What exactly IS the blockchain?

At its core, the blockchain is a ledger — a series of records and data points,
like a spreadsheet or old accounting book.

Unlike spreadsheets or old books, though, the blockchain is _decentralized_ —
instead of it being stored in one place, it’s stored across different computers
across a network and around the world. Essentially, there’s no single book that
can be easily lost or updated. Instead, the data is verified by checking the
_blocks_ (or bundles of transactions) across different _validator nodes_.

There are a few different blockchain protocols that people can use, such as
Solana, Bitcoin, and many, many others. People can use blockchain technology as
a way to store data, value, and — in the case of Solana and certain other
protocols, run programs.

## How does that relate to cryptocurrency?

Well, let’s start with some definitions first. _Cryptography_ is the art of
keeping things secure. You’ve probably encountered this before, through
_encrypted_ data and passwords.

_Cryptocurrency_, then, is a type of currency that is based on cryptography.
Rather than the ledger being centralized, transactions are decentralized —
there’s no single authority validating everything — and as secure as other
encrypted data. The translation? It’s a very safe way of storing data and value
with no choke points or central points of failure and which is very difficult to
manipulate.

## So what exactly is a coin? What is a token? What’s the difference between coins and tokens?

All blockchain protocols have coins that represent value and can be traded. On
Solana, this coin is called SOL.

Tokens, meanwhile, are built by individual projects on top of a base blockchain
protocol. All blockchain projects are “tokenized,” and the Solana protocol is
open for anyone to build their own tokens on top of it. Tokens are used to
actually do stuff on the blockchain through trading, including executing “smart
contracts.”

## Okay, wait. What is a smart contract?

A smart contract is a contract that is written into the code of a blockchain and
executed automatically when terms are met. It’s something that Solana and
certain other protocols can do, but some other blockchains — most notably
Bitcoin — cannot.

Think of a regular contract like a housing lease agreement. You pay rent; in
exchange, you have a place to live. If you no longer have a place to live, you
no longer pay rent; if you don’t pay rent, you’ll be kicked out. In a regular
contract, the execution depends on the humans. A tenant fulfills their
obligations of the lease and monitors that a landlord fulfills theirs, and vice
versa.

With a smart contract, however, that execution is hardcoded in software, and
software determines when conditions are met. That allows people to build some
really cool functionality and dApps.

## DApps? What are dApps?

A dApp is a _decentralized application_, or app that uses smart contracts. Any
crypto program — like a marketplace, blockchain game, or tool used for DAO
governance — is a dApp.

DApps are the tools you use to do things on the blockchain, whether that’s
buying some art, voting in your decentralized organization, paying without
intermediaries, or participating in decentralized finance.

## And what is web3?

Web3 is the next iteration of the internet. Each iteration of the internet has
been based on specific ideas: If web 1.0 was static websites and hyperlinking
(like AOL or GeoCities) and web2 was social media (like Twitter, Facebook, and
so on), web3 is built around the idea of decentralization.

Instead of an internet controlled by a handful of powerful, large platforms,
web3 is built around the idea of a diffuse internet that anyone can support and
control. Think of it as a return to early internet values — web3 is an era that
removes gatekeepers and centralized “news feed” silliness.

It’s a world that can be built on the blockchain, using smart contracts.

## Oooookay, so I think I’m starting to get this. So what exactly is the advantage of all this decentralization?

When the network isn’t controlled by a single entity, that means…

- People who traditionally haven’t had access to banking have the ability to
  participate in the financial system.
- You can pay for your favorite coffee without any fees or intermediaries.
- Networks can’t be compromised or shut down due to one large controlling
  entity, like a nation state or powerful platform.
- Users themselves can easily have a stake or buy into the platforms they are
  using, voting on the future of a video game metaverse.
- And much more.

That’s the really exciting part of all this. It’s all extremely early in the
web3 revolution, and you can watch it all happen and be a part of it — because
web3 is all about community and participation. All these use cases are being
[built right now](https://solana.com/events) by developers around the world and
you can help out by joining in.

## Why Solana?

This is the cool part — Solana is engineered for widespread, mainstream use by
being energy efficient, lightning fast, and extremely inexpensive.

Many of the core Solana builders, like co-founder Anatoly Yakavenko, have a
background in building cell phone networks. That means that they are singularly
focused on building for scalability (the ability to grow) and efficiency (the
ability to get the most information across with the least amount of resources).
They believe that in order for people to build the projects that will get the
public using blockchain technology, you need to make it as easy and painless as
possible for people to experiment and use the technology as possible.

Some of the current leading blockchain technologies use energy-hogging,
time-consuming mining — or solving very complex calculations — to validate
security, and have fees that can range into the hundreds of dollars per
transaction. Solana uses what’s called _proof of stake_ to validate information
— there’s no mining involved — and a special innovation called
_[proof of history](https://solana.com/news/proof-of-history)_ on top of that
that allows it to validate even quicker. That makes it
[extremely efficient](http://solana.com/environment), using energy at the same
scale as a few Google searches and significantly less energy than other regular
household uses like running your refrigerator. Transaction fees, which are used
to maintain blockchain networks and have ballooned elsewhere, are a fraction of
a cent on Solana.

All of that translates into projects and tools built on Solana that can be as
frictionless and easy to use as the rest of the internet, for both developers
and users.

Want to learn more? Keep reading!
