Blockchain what and how

Cryptocurrency is the most buzzing word these days, you might have heard about blockchain around bitcoins. However, cryptocurrency and blockchain are two different things. Blockchain concept was initially presented by an unknown named Satoshi Nakamoto in 2008, whereas bitcoin was introduced in 2009. Basically, bitcoin uses the blockchain mechanism. Blockchain is not completely about bitcoin, there is more to it.

This article will provide information on what and how blockchain works.

What is Blockchain?

Blockchain is a robust, transparent, public ledger.

For instance, let us consider a banking scenario. Present for any online transactions we use banking service because they are the most trusted third parties. Two users, Allen and Mark would like to do a transaction. Allen transfers some amount to Mark using traditional banking service. Bank transfers the amount successfully, taking some amount as transaction charge and a time of an hour or so. Using blockchain mechanism users can do the same transaction much hasslefree, with cheap transaction charge and in a matter of seconds.

Blockchain works on distributed and public ledgers. In the above case whenever a transaction is made a new block is appended to the blockchain and it gets shared to each node verifies the genuineness of the block, after successful authentication each node would append this block to their blockchain.

Blockchain ensures complete security because it is decentralized and there is no central hub where all the transaction data is stored. The entire network has all the details of the transaction ensuring security.

How does Blockchain work?

Basically, each block contains some data as well as the link address to previous block and the next block. The chain is nothing but the link between blocks.

Block contains three elements.

1. Data

Data stored in the block depends on the application, In the above case as we are using the blockchain mechanism for transactions, each block stores transaction information.

2. Hash

Block also has hash. Hash is a unique identifier to block and its content. Once a block is created its hash is being calculated.

3. Hash of the previous block

Block contains hash nothing but a link to a previous block. This creates a chain of robust and secured blocks.


hashing prevents tampering but that’s not enough to keep the block secured so it uses an additional mechanism called Proof-of-work. In the case of bitcoin, It takes about 10 min to calculate proof-of-work and append a new block.

The proof-of-work mechanism makes it hard to tamper because if we tamper one block we still need to recalculate the proof of work for all blocks.

Applications of blockchain