What’s inside “Blockchain technology”?

blockchain technology

What’s Inside “Blockchain technology”?


Blockchains are incredibly popular nowadays but what is a blockchain? How does it work? What problems do they solve? And how can they be used?


As the name indicates, a blockchain is a chain of blocks that contains information. Block shows the digital information and Chain represents the public database. This technique originally described in 1991 by a group of researchers and was originally intended to timestamp digital documents so it’s not possible to tamper with them, however, it was mostly unused until it was adopted by Satoshi Nakamoto in 2009 to create a digital cryptocurrency named bitcoin. The actual identity of Satoshi Nakamoto is still unknown. The words block and chain were used separately in Satoshi Nakamoto’s original paper but were eventually commercialized as a single word, blockchain, by 2016.

What is Blockchain?

So, a blockchain is a distributed ledger that is completely open to anyone and that is used to record transactions across many computers so that any record entered cannot be altered retroactively, without the alteration of all subsequent blocks. They have an interesting property that once the data has been recorded inside a blockchain, it becomes very difficult to change it.

Structure of Blockchain

Let’s take a closer look at the block. Each block contains some

  • Data
  • The hash of the block
  • The hash of the block of the previous block

Data:    The data stored inside the block depends on the type of blockchain. The bitcoin blockchain for example stores details about the transaction such as the sender, receiver and the number of coins.

Hash:   A block also has a hash, you can compare a hash to a fingerprint. It identifies a block and all of its contents. Like a fingerprint, every block has a unique hash. Once the block is being created, its hash is being calculated. Changing something inside the block will cause the hash to change. So, in other words, hashes are very useful when you want to detect changes on the blocks. If the hash of the block changes, it is no longer the same block.

Hash of the previous block:  The third element of the block is the hash of the previous block and this effectively creates a chain of blocks and this is the technique that makes the chain of blocks so secure. For example, if there is a chain of blocks then every block in the chain has the hash of the previous block as well along with its own unique hash.

blockchain technology

Security of Blockchain:

If somebody tries to change the contents of one block, its hash also gets changed and the change in the hash of one block makes it different from the hash of the previous block. So tampering contents in blockchain means changing the contents of all the blocks which is practically impossible to do.

However, computers nowadays are very fast and can calculate and change thousands of hashes in lesser time. So just using a hash to secure blockchain is not enough for this purpose there is another technique that makes blockchain secure and that is proof of work.

Proof of Work

Proof of work is a mechanism that slows down the creation of a new block. In the case of the bitcoin blockchain, it takes 10 minutes to add a new block to the chain. This mechanism makes it very hard to tamper with the block because to tamper with one block you need to calculate the proof of work for all the following blocks. Recalculating all those hashes would take an enormous and improbable amount of computing power.  So basically the security of blockchain comes from its creative use of hashing and proof of work techniques. But there is one more way by which blockchain has secured itself is by being distributive, there is no single entity to handle blockchain rather it is a peer to peer activity where everyone is allowed to join- even you. When somebody joins the network, he gets a full copy of the blockchain. The node can verify that everything is in order.

 How does blockchain work?

Any new data is entered in the blockchain in the form of a block. In order for a block to be added to the blockchain, however, four steps must take place:

  • A transaction must occur. If you want to spend your bitcoins to buy groceries then this is the transaction or a purchase
  • That transaction must be verified. After making that purchase, your transaction must be verified. This verification is not done by a central authority like bank or government instead it is done by a network of computers, that rushes to check that your transaction happened in the way you said it did. That is, they confirm the details of the purchase, including the transaction’s time, dollar amount, and participants.
  • That transaction must be stored in a block. After your transaction has been verified as accurate, it gets the green light. The transaction’s dollar amount, sender’s and receiver’s digital signature are all stored in a block.
  • Then the block is given a hash, a unique, identifying code called a hash. After getting its hash, the block is then entered into the chain.

When that new block is added to the blockchain, it becomes publicly available for anyone to view

blockchain technology
The workflow of Blockchain For More go to blockgeeks.com


Uses of Blockchain in practical life:

Businesses have been thus far reluctant to implement blockchain technology into their business structure. The basic use of blockchain today is in cryptocurrencies mostly bitcoin. Keeping monetary transactions out of the way, Blockchain is a very reliable way of storing data. Here are a few operational applications of blockchain in real life:


Blockchain forms the bedrock for cryptocurrencies. They use blockchain technology to record transactions. For example, the bitcoin network is based on blockchain.

Smart Contract

A smart contract is a computer code that can be built into the blockchain to facilitate, verify, or negotiate a contract agreement. Smart contracts operate under a set of conditions that users agree to. When those conditions are met, the terms of the agreement are automatically carried out.

Supply chain

There are a number of efforts and industry organizations working to employ blockchains in supply chain management. This would allow companies to verify the authenticity of their products. Example Walmart and IBM are running a trial to use the blockchain-backed system for their supply chain monitoring

Property and other Records

The process of recording property is not just costly, time-consuming and may prone to human error in the local recorder’s office. If property ownership is stored and verified on the blockchain, owners can trust that their deed is accurate and permanent.


Illegal trading involved in blockchain

Due to the confidentiality and protection of the blockchain network makes it prone to illegal activities and trading using bitcoin. The famous example is an online “dark web” market place with the name of Silk Road. This market place was in operation from Feb 2011 till Oct 2013 and a lot of illegal purchases were done without any traces using this platform. Later it was shut down by the FBI.  Current U.S. regulation prevents users of online exchanges, like those built on blockchain, from full anonymity.

 Future of Blockchain

Started as a research project in 1991, blockchain has now entered in its late twenties and is making headlines. Though blockchain has faced intense scrutiny in the past 2 decades, it is believed by businesses that blockchain has a bright future. With many practical applications for the technology already being implemented and explored, it is understood that this technology has a lot more potential that needs to be tapped. We just need to see how the future turns out to be for Blockchain and when the businesses will implement this technology for more secure and efficient operations

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