What is Blockchain, and How does it Work?

What is Blockchain, and How does it Work?

The workings of the core technology behind major cryptocurrencies today.

I've been in an interesting cohort organized by web3Ladies and Polygon. I was given the task of writing about a topic I've learned about. So, I chose to write about blockchain.

What is a Blockchain?

A blockchain is a shared, distributed database or ledger between computer network nodes. A blockchain serves as an electronic database for storing data in digital form. The most well-known use of blockchain technology is for preserving a secure and decentralized record of transactions in cryptocurrency systems like Bitcoin. The novelty of a blockchain is that it fosters confidence without the necessity for a reliable third party by ensuring the integrity and security of a record of data.

The way the data is organized on a blockchain differs significantly from how it is typically organized. In a blockchain, data is gathered in groups called blocks that each include a set of information. Blocks have specific storage capabilities, and when full, they are sealed and connected to the block that came before them to create the data chain known as the blockchain. Every additional piece of information that comes after that newly added block is combined into a brand-new block, which is then added to the chain once it is full.

A blockchain, as its name suggests, arranges its data into bits (blocks) that are connected together, while a database typically organizes its data into tables. When used in a decentralized way, this data structure creates an irreversible history of data by design. When a block is completed, it is irreversibly sealed and added to the timeline. When a block is added to the chain, it receives a precise timestamp.

Blockchain aims to enable the distribution and recording of digital information without its editing. So, a blockchain serves as the basis for immutable ledgers, or records of transactions that cannot be changed, removed, or destroyed. Because of this, blockchains are often referred to as distributed ledger technologies (DLT).

Unlike what most people believe, Bitcoin and Blockchain cannot be used interchangeably. Although Blockchain technology enables a wide range of applications in a number of different sectors, including banking, supply chains, manufacturing, etc., Bitcoin is a currency that depends on Blockchain technology to be safe.

Properties of Blockchain Technology


The blockchain is an unchangeable, everlasting network because of its immutability. The nodes that make up the blockchain network are how it works. The electronic ledger is replicated on each node of the network. Every node first verifies a transaction's legitimacy before adding it to the network if the majority of nodes agree that it is legitimate. Accordingly, no one is able to add any transaction blocks to the ledger without the consent of a majority of nodes. Any records that have been verified cannot be altered or changed back. It cannot be changed, deleted, or edited by any network user.


One of Blockchain's core principles is the creation of immutable ledgers. Since relying on a third party middleman to keep the database safe necessitates trust, centralized databases are prime targets for fraud and hacking.

Blockchain, like Bitcoin, maintains a perpetual forward motion in its ledgers. The digital ledger is replicated on each node of the system. Each node must confirm the legitimacy of a transaction before adding it. It is recorded in the ledger if the majority believes it to be true. This encourages openness and eliminates corruption. Another point is that it is impossible to simply go back and modify a transaction block after it has been posted to the ledger. Therefore, it won't be editable, erasable, or updateable by any network user.


You may keep your assets in a network using decentralized technology without being subject to the supervision and control of a single person, organization, or other body. Through this, the owner has direct control over their account through a key connected to the account, giving them the ability to transfer their assets to anyone they like. The decentralization of the web made possible by blockchain technology is nothing short of a revolution in the online world.


The blockchain's records are all individually encrypted. The blockchain network's whole process is made more secure by the use of encryption. It does not follow that one may easily add, alter, or remove data on the network since there is no centralized authority. Every piece of data on the blockchain is cryptographically hashed, giving each one a distinct identity on the network. Each block contains its own distinct hash as well as the preceding block's hash. The blocks are cryptographically connected to one another as a result of this characteristic. Any effort to update the contents would require changing every hash ID, which is just not doable.


Every blockchain has a consensus to assist the network in reaching choices quickly and impartially. A Consensus is a decision-making technique that helps the network's active nodes swiftly come to a consensus and ensures the system runs smoothly. Although nodes may not have much confidence in one another, they might have confidence in the network's central algorithm. A consensus mechanism is necessary for any blockchain, or else it will lose value. There are numerous accessible consensus mechanisms, each having advantages and disadvantages. They include:

  • Proof of Work (PoW)
  • Proof of Stake (PoS)
  • Delegated Proof of Stake (DPoS)
  • Proof of Activity (PoA)
  • Proof of Authority (PoA)
  • Proof of Burn (PoB)
  • Proof of Capacity / Proof of Space (PoC / PoSpace)
  • Proof of Elapsed Time (PoET)
  • Proof of History (PoH)
  • Proof of Importance (PoI)

    Types of Blockchain

    In all, there are four distinct types of blockchains. They are:

    Private Blockchain

    Private blockchains run on closed networks and are best suited to private corporations and organizations. Companies may utilize private blockchains to tailor their accessibility and permission choices, network characteristics, and other critical security features. A private blockchain network is managed by a single authority.

    Public Blockchain

    Bitcoin and other cryptocurrencies arose from public blockchains, which also contributed to the widespread use of distributed ledger technology (DLT). Additionally, public blockchains aid in the elimination of some obstacles and concerns, such as security weaknesses and centralization. DLT distributes data throughout a peer-to-peer network rather than storing it in a single place. A consensus mechanism is used to verify the validity of information; proof of stake (PoS) and proof of work (PoW) are two commonly utilized consensus methods.

    Hybrid Blockchain

    Sometimes referred to as permissioned blockchains, are private blockchains that provide approved users exclusive access. These kinds of blockchains are often set up by businesses in order to get the best of both worlds. They provide better structure when determining who may join the network and in what transactions.

    Consortium Blockchains

    Similar to hybrid blockchains, consortium blockchains feature both public and private components. However, a single consortium blockchain network will be managed by numerous companies. Though initially more difficult to set up, these blockchains may provide superior security once they are operational. Consortium blockchains are also the best for working with various organizations.

How Does it Work?

A block, which includes a certain amount of transactions and a link to the block before it, is how the blockchain organizes transactions. This is what sequentially places the blocks one after the other. As a result, blocks are arranged into a chronological chain that lends the whole system its name, blockchain. Transactions that are already included in a block are thought to have occurred at the same time as those that are not, and vice versa. Each node has the ability to compile transactions into a block and broadcast it to the network as a recommendation for the next block.

Each block must include the solution to a challenging mathematical puzzle generated by an irreversible cryptographic hash function in order to be added to the blockchain. Such a mathematical puzzle can only be solved by picking random numbers that, when coupled with the information in the preceding block, provide a certain outcome. A conventional computer could need a year to make the correct assumption and figure out the equation. But since there are so many computers in the network guessing numbers, a block is usually cracked every ten minutes. The node with the correct answer has the privilege to add the next block to the chain and broadcast it to the network.

What happens if the problem is resolved simultaneously by two nodes, who then transmit their blocks to the network at the same time? Each node builds on the block that it receives first in this scenario since both blocks are broadcast. The blockchain protocol, however, mandates that every node instantly build on the longest blockchain accessible. Each node will choose the longest chain as the sole choice if there is any doubt as to which block is the final one as soon as the next block is solved. Due to the low likelihood of solving several blocks at once, it is extremely difficult for numerous blocks to be solved again, creating distinct "tails," and as a result, the whole blockchain soon stabilizes to a single string of blocks that every node accepts.

That would be all for now. Thank you for reading!