What is Blockchain Technology and How Does it Work

July 10, 2021
what is blockchain technology and how does it work

The concept of Blockchain Technology is used to store databases. It is the database which is stored among a number of computers and this particular data is distributed amongst various networks of computers. The information is stored in digital form and is stored electronically at multiple locations. This is the record of a transaction that is not centralized but it is decentralized. The concept of Blockchain guarantees the security of information.

What is Block?

In a chain, there are multiple blocks and each block has three elements

  • It consists of actual data that is stored in the Block.
  • A 32-bit number is called a nonce. It is randomly generated when a block is to be created, and further, it creates a hash. Hash is generated by a predefined algorithm to detect tampering with data.
  • Hash starts with the number zero which is the smallest number and it is a 256-bit number.

Blockchain Technology

Blockchain Technology

Blockchain is a record of transactions in a ledger and this particular record is duplicated on different networks. Blockchain is a kind of system that is used for information recording and this information cannot be changed and is almost impossible to hack.  Bitcoin is the best use case, in which blockchain technology is used.  Many companies are using this concept of Blockchain technology which includes high street organizations like  Walmart, J.P Morgan, Alibaba, Amazon, PayPal, and Microsoft.

Blockchain system ensures the security of information. If there is a hacking attempt, then it cannot affect the whole information as information is stored in the form of Blocks, if one block is hacked, other parts and copies of information stored in the form of blocks are still safe.

As this information is stored in the form of different blocks and the same set of information can be found on different blocks. Blockchain stores its database in the form of blocks and these blocks are linked together.

How Does Blockchain Technology Work?

The record or data is stored in the form of blocks, which are stored on multiple systems called “Blockchain Nodes” and these are present across the network. As part of blockchain technology, trust is established with given nodes. The information which is alternatively known as the ledger is stored at fag end of the chain and duplicated. In case of any request for information or update of information, the same request is passed to each node on the blockchain network.

The information is replicated and updated at each node ensuring that consistency is maintained at each block on the network. Since the information is shared across the nodes, the whole data is encrypted along with a set of digital signatures, which ensures that any potential attack by any hacker is tracked at the time of validation of the signature at the receiving end.

This kind of arrangement ensures that the whole blockchain technology network is secured with almost no possibility of a change of data or requests. Also, as information is copied on multiple nodes, any hacker even if managed, has to make the damage at multiple nodes to have significant damage.

Types of Blockchain

There are multiple types of blockchain structures. It is mostly derived from the use case and type of permissions for the usage of blockchain. There are blockchain systems that are totally permission-less, which means any user can join the network and there is no restriction of the newly joined node on the whole network. There are other types of blockchain networks that may restrict the nodes with specific permissions.

Public Blockchains

As the name suggests the public blockchain is totally open blockchain, with no specific permissions in the picture. In this kind of network, all nodes in the blockchain have equal rights on information and traversing the network. One of the finest examples of a public blockchain is Bitcoin trading and other publicly traded cryptocurrencies.

Private Blockchains

The private blockchain network is the one that is used and controlled by an organization for internal use. Under this kind of system, the permissions are controlled by the organization itself and no two nodes may have equal kinds of permissions. Also, the degree of decentralization is very minimal as the whole system is internal to an organization. The access and validation for the addition of new blocks/data will be faster as less number of blocks are involved.

Hybrid Blockchains

This is an amalgamation of public and applicable private blockchains. The overall system is controlled by an organization, but at some level of access is performed by the public blockchain. This arrangement can be helpful where transparency is expected (like in public blockchains) along with high levels of efficiency of private blockchains, considering the low level of decentralization.

Consortium Blockchain

It is a kind of blockchain technology involving multiple organizations and contains a group of private blockchains. This kind of setup has more decentralization than an individual private system, which ultimately results in high security. This kind of arrangement requires an extreme level of cooperation between multiple organizations. This is because all organizations may not have similar levels of infrastructure and technologies.

Blockchain Future

Blockchain Future

The rise of Bitcoin has revolutionized the application of blockchain, which is now not only limited to digital currencies but a variety of other applications like supply chain management, banks, and so on. In fact, many banks around the world are now moving to digital currencies considering the safety of the public blockchain system. This may not only solve the problem of fake currency but reduces the cost of overall handling of physical cash. Also, this kind of system reduces the risk of theft and establishes a greater level of trust.


As evident, the blockchain has not only led to a technological revolution but also provided a platform for establishing a greater level of trust and transparency. The rise of bitcoin is merely a start and there is great potential for this technology in the near future. Overall, this will be the game changer with many high street organizations joining this revolution.