NFTs & Crypto

How does blockchain work? 

How does blockchain work, is one of the most repeated questions lately. As its name indicates, a “blockchain” is a chain of blocks that contains encrypted information of transactions on the network. Also, because it’s nested (and thus the word string), you can use encryption to send data (or values) with fairly strong encryption.

To explain this idea, it’s helpful to imagine a ledger that records all cash inflows and outflows.   What is really new is that the information for the transmission does not need to be authenticated by a third party, but rather the information is distributed to multiple independent and equivalent nodes to verify and validate the information without knowing each other. Once you have entered the information, you cannot delete it, you can only add new information. You can’t change the data from the previous block in the chain because the blocks are linked by cryptographic encryption and you need to change the information in the previous block.

How the relationship between banks and the Blockchain work

The fear of the banks is the potential that Blockchain has to eliminate intermediaries that register the accounts, since said accounts and transaction flow are automatically registered in the chain. Blockchain essentially eliminates intermediaries and registries, decentralizing all controls. Users manage the processes, not the banks (we are still talking about money, but the examples can be extrapolated to other types of transactions) and they are essentially thousands or hundreds.

Banks are not mere pointers of numbers indicating the amount and where the money has come from and where it has arrived. So blockchain is becoming part of a big bank with millions of nodes, each one becoming a participant and manager of the bank’s ledger.

So a blockchain, now a huge ledger where records (blocks) are linked and encrypted to protect the security and privacy of transactions. In other words, it is a distributed and secure database (thanks to encryption) that can be used for all kinds of transactions that do not necessarily have to be cheap. The blockchain has a considerable requirement. The users who are responsible for validating these transactions (nodes) must register in this huge account book. Therefore, it operates transactions on a blockchain.

Practical example of how does Blockchain work

This process is relatively easy, but as we say it is related to more people. Now Mariano and Luis are not alone, but they will be a member of a large group of users that is responsible for the whole process happening because it happens because it happens.

Let’s imagine Paco wants to send Juan a number of Bitcoins through the Blockchain. To do this, Paco will access his digital wallet and indicate the amount to be transferred. Paco indicates his intentions to send Bitcoins without revealing his identity. When sending the request, the chain made up of small blocks of distributed information, he will check that he has enough money in his wallet of origin, to send it to the destination wallet. If the request is accepted, the corresponding note will be generated in both accounts. The records of these notes will be reflected in the chain in a distributed way, again.

How does Blockchain work internally

Blockchain is a technology that mainly involves  a distributed network of nodes. Something similar to the operation of Napster or Torrent, where the information is distributed in different computers and replicated. A distributed or P2P network is a set of nodes that do not have a central element or a single point of failure, and decisions are made  based on consensus or common consensus.

In addition to having a record of transactions, these blockchains have the particularity that each new block contains a hash function or summary of the previous block. The origin of blockchain technology became popular when under the pseudonym Satoshi Nakamoto an article was published on the concept of implementing a decentralized digital currency system called Bitcoin: A P2P Currency System.


The hash function generates a unique identifier from the content of each block, it is like a summary of the previous content. What is characteristic is that by applying a specific algorithm to a content, the same summary is always obtained. This way it can be verified. Another important property is that from the abstract, the original content cannot be obtained. This allows actions to be irreversible and does not allow old blocks to be changed, which helps make your chain more secure and immutable. Each node that participates in the network contains a copy of the blockchain. Therefore, each time a new block is generated and validated, the node updates the chain by adding this new block to its end.

How Bitcoin block contents are generated

The process of generating new transaction blocks is called mining. Each node can participate by verifying transactions using cryptographic algorithms. In the event that you solve these problems, you will be rewarded with cryptocurrencies. This is because the process of summarizing the contents requires complex mathematical calculations that consume computer resources and time. Therefore, in order to obtain these resources, it was decided to reward in some way the machines that carried out said operations.

Blockchain decentralization benefits

Decentralization, without a doubt, is one of the strengths and pillars of technology. The more nodes participate in this network, the more secure it becomes from external attacks or compromised nodes. The well-known 51% attack consists of taking control of more than half of the network nodes, and thus controlling the consensus mechanism.

In the original article published by Satoshi, one of the most important advantages of the Blockchain is observed: the ability to carry out transactions on the network without the supervision of any third party. This feature makes it a very popular and popular technology since participants do not need to trust anyone to carry out their operations. With this philosophy it is ensured that nobody and nothing can intervene in the system as could happen with the banks. The accounts cannot be modified under any circumstances, and mathematically it is impossible. In other words, the robustness and fidelity of the system is intrinsic to it.

In traditional systems there are regulatory bodies such as banks and governments that act as an intermediary entity between the parties. Users must trust these entities, which could also be a single point of failure or external control. Central banks can and do intervene in money values ​​by printing money at their convenience and that of the markets. This can cause great destabilization of the system and the most shameful thing is that it is controlled by a few countries, which have absolute control.

What is blockchain, what can block chains be used for

The block chain can store transaction information, contracts or digital currencies (cryptocurrencies).  Currently, the most popular blockchain applications  they are Bitcoin and Ethereum.

Bitcoin is a blockchain-based cryptocurrency launched in 2008 with a focus on providing monetary transactions. This is the most popular project and is currently available as a payment method in online stores.

Cadena de bloques

For individuals, purses or purses have emerged for  store the private keys needed by the users of these cryptocurrencies. The keys and addresses contained therein grant access to funds and execute transactions with the blockchain.

In recent years, the number of new projects  involving these technologies has skyrocketed. Many of them are very promising in the long term and have an impact on sectors such as medicine, finance, energy or agriculture.

Despite having been in operation for years, the projects that have arisen around the concept of Blockchain still do not have great maturity and mass adoption. However, the use and applications developed are growing over time.

Frequently asked questions about the use of the blockchain

What is the future of the blockchain?

The future is uncertain, but it is a reality that advances in Blockchain technology continue to increase. Data stored on blockchains is increasing and new ideas are emerging around distributed storage. Bank transactions are just one example of how the transactions we currently know could be transformed, achieving greater immediacy, low costs and low risks.

The use of blockchain as a data layer allows and provides benefits such as security, anonymization and immutability. It is a unique source of truth that is extremely difficult to corrupt or lose. With these features, it is possible for each entity or individual to have control of all their data without the need for a third party to hold it. In this way, you could sell or share your data with whomever you choose.
Another application is found in NTFs (non-fungible tokens) which are unique, non-reproducible and indivisible digital assets that are gaining attention in the context of the development of blockchain technology and cryptocurrency phenomena. For example, auction houses are in a position to use this technology, as are artists, athletes and gamers. Or used in video games like

What is a blockchain?

Blockchain is a secure, encrypted, distributed database structure that allows network participants to create trustworthy and immutable records of transactional data without intervention. In addition to processing transactions, the blockchain can perform a variety of other functions, including: B. Smart contract.

Smart contracts are digital contracts embedded in code that can have unlimited formats and conditions. Blockchain has proven to be a great solution for securely coordinating data, but it does much more, such as tokenization, incentive design, attack resistance, and counterparty risk mitigation. The first blockchain was the Bitcoin blockchain, which itself was the culmination of more than a century of advances in encryption and database technology.

What is blockchain software?

Blockchain software is like any other software. The first of its kind was Bitcoin. It was released as open source software and is now available for anyone to use or trade. Various efforts are underway throughout the blockchain ecosystem to improve the original Bitcoin software. Ethereum has its own open source blockchain software. Some blockchain programs are unique and not open to the public.

What is a blockchain database?

Historically, databases have created a centralized client-server architecture in which a single institution controls a central server. In this design, data protection, modification, and deletion are based on a single point of failure. The decentralized architecture of blockchain databases has emerged as a solution to many of the weaknesses of centralized database architectures. The blockchain network is made up of many distributed nodes and accepts participants who need to reach consensus and maintain a single record of transactions together. What is the blockchain system

How does the blockchain work?

When a digital transaction occurs on a blockchain network, it is combined with other transactions that occurred during the same period to form a cryptographically secure “block” that is sent to the network. A blockchain network consists of nodes or participants that validate and submit transaction information. Transaction blocks are validated by participants called miners who use their computing power to solve cryptographic puzzles and validate transaction blocks.

The first miner to solve and validate the block will be awarded. Each validated block is connected to the previously validated block to create a chain of blocks. The basis of important encryption in the blockchain is the hash function. The hash assigns a fixed value to the string entered into the system. Blockchain hashing power provides a deterministic, fast, computable, and resilient system to the figure above. To learn more about how blockchain works, search our knowledge base.

What is a blockchain application?

Blockchain applications are similar to traditional software applications, except that they implement decentralized architectures and cryptoeconomic systems to improve security, build trust, tokenize assets, and design new network incentives. From predictive markets to smart legal comparisons, here are 90+ Ethereum applications currently in use across the Ethereum blockchain ecosystem.

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