How Blockchain Works

How Blockchain Works
Written by Shuvhojit DebJanuary 25, 2022
12 min read
Shuvhojit Deb

Full Stack Developer

In this blog, let's discuss how blockchain works.


The following article provides an outline for How Blockchain Works? A blockchain is a group of blocks that are called records which do grow continuously and are linked together in the form of cryptography. Every block contains a hash that will link to the previous block with data and timestamp details. The design of this model resists the manipulation of data. This allows the easy maintenance of continuously growing data. A Japanese named Satoshi Nakamoto invented Blockchain technology in the year 2008. It was used to serve as a ledger in the form of a bitcoin public ledger. The blockchain invention made the successful entry of a new currency called bitcoin currency which led to the safe and secure form of currency transactions without any validation or authentication through a central server.


How Blockchain Works?

The blockchain is a chain of blocks that holds some data with some metadata related to the other blocks that form a giant chain-like architecture that allows encryption in the form of a cryptographic manner. The data is immutable in the blocks. This is a decentralized architecture where no central supervision exists in authorizing or supervising the operations in the blockchain. A typical architecture of a block contains metadata and all the transaction details stored for further reference. The metadata will be held in the block header. Each header contains a hash that points to another block’s header to form a chain-like structure. The mainline which forms the chain is called the main branch blockchain. The key element of the blockchain works is the hashing function that determines the linkages of the blocks.

Applications of Blockchain Works

The different applications of Blockchain works are given below:

  1. Blockchain’s main application is in financial services to execute digital contracts safely and securely with ease and effectiveness.
  2. Digital and Smart keys in maintaining the contracts of the digital property or Smart property.
  3. Smart keys to managing the property or vehicles using remote protocols to execute the operations with a single tap.
  4. Many smart appliances can be controlled using blockchain operating system technology.
  5. Sensors in the case of Supply chain management can be transported around the globe with the help of Blockchain technology easily.
  6. The healthcare industry is mostly benefited from the use of Blockchain technology by securing the information of many drugs or medicines the profiles and medical history of customers, and many other confidential data in research and developments as well.
  7. The music industry also gets benefited from the blockchain operating system technology in the form of establishing and storing the licenses or ownership of different music.
  8. Important personal documents and personal certificates can be stored online and can be validated by digital keys.
  9. Digital passports were also launched on Github with the help of this Blockchain technology.
  10. The request from the users through API will be authorized through HFC membership services.
  11. There will be smart contract agreements that will be enforced and evaluated, where the transaction is committed to the ledger after the validation.
  12. The different modes of technologies where the Blockchain system will be built are P2P network, private key cryptography, and blockchain protocol (program model).
  13. Every Input information was given to the blockchain is a hash number that is included in the previous block’s hash number in the blockchain works.
  14. The Blockchain protocols ensure the network is run in a way that was designed and intended to be run by the admins or owners, where the network is completely autonomous and not managed or controlled by anyone.

Pros and Cons of Blockchain Technology



While the U.S. dollar is issued by the Federal Reserve, no government agency issues or controls bitcoin and other cryptocurrencies. This also means that the ability of anyone government or agency to determine the fate of a public blockchain is eliminated. The lack of intermediaries reduces cost, as the fees associated with third-party transactions also are eliminated. Another byproduct of how blockchain works is time efficiency — the blockchain is open for business 24 hours a day, 365 days a year, unlike banks and other intermediaries.

Transparency plus anonymity:

All transactions on the Bitcoin blockchain are recorded on computers across the network. Transactions are completely transparent because the address and transaction history of bitcoin wallets, which hold the cryptocurrency, is publicly viewable, but the owners of each wallet connected to those public addresses are anonymous and not recorded.

Accuracy and security:

Because the transaction involves little human interaction, there is a lower risk of error. Each transaction must be confirmed and recorded by a majority of the network nodes, which makes it vanishingly difficult to manipulate or alter information. This also prevents anyone from spending a bitcoin more than once.


Criminals like crypto:

Like a lot of new technologies, some of the first adopters have been criminal enterprises. They use cryptocurrencies such as bitcoin both as payment because of the privacy it provides and to target holders of bitcoin for scams. For example, bitcoin was used by consumers of Silk Road, a black market online shopping network for illegal drugs and other illicit services that were shut down by the FBI in 2013. In the recent ransomware attack on Colonial Pipeline, the company paid $4.4 million in cryptocurrency to unlock its computer systems.

Meanwhile, bitcoin investment scams have skyrocketed in tandem with its recent historic rise. The Federal Trade Commission reported nearly 7,000 people lost $80 million from October 2020 through March 2021 in schemes touting quick returns, a nearly 1,000% rise in reported losses year-on-year.

Blockchain cryptocurrencies are highly volatile:

Some people wonder, "Is blockchain a good investment?" That depends on your investing goals and your risk tolerance. The popularity of cryptocurrency exploded in 2021, as bitcoin hit a record spot price of nearly $65,000 in April. But owing to its inherent volatility, the price of bitcoin dropped nearly 50% by early June — then began to climb again.

Crypto use is still niche:

Many more exchanges, brokerages, and payment apps now sell bitcoin, and many companies such as PayPal and Microsoft accept bitcoin for payment. Still, purchases with blockchain currencies such as bitcoin remain the exception, not the rule. Also, the sale of bitcoin for purchases on cash apps such as PayPal requires users to pay capital gains taxes on the bitcoin sold, beyond whatever state and local taxes are paid on the product or service.


There are different applications using Blockchain in the area of financial applications. Blockchain technology is a revolution in the transactional area of financial applications where it keeps the data secure and safe as it is immutable and robust. The privacy, protection, and security will depend on the role and user of the application management. The Transactions in Blockchain technology are broadcasted to every node by creating different versions of events for every node. In Blockchain technology, authorization and authentication of the transactions are vital in the digital transactions, which are established by configuring the result. The distributed network in the blockchain technology prevents fraud in the nodes of the blockchain network, which needs to reach the consensus that enables the impossibility of breaking the Blockchain network.

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Shuvhojit Deb
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