The Simple Explanation to Blockchain Technology

It’s no secret that understanding blockchain technology can be challenging. Understanding exactly how blockchains work, what they do and how they can be used is a bit stressful, especially if you’re not very knowledgeable in technology.

Fortunately, you can still understand how blockchain technology works by thinking about it in simpler words. So let’s take a look at the exact breakdown of how blockchains work.

What does a blockchain look like?

blue blockchain simple graphics

Blockchains are virtual, and therefore they have no physical form. However, we have illustrated a simple scheme that helps people understand how they work better. The figure above shows a row of blocks, each of which contains data in the form of a distributed book.

In essence, it is a database that can be shared by multiple devices or institutions, and the information is summarized instead of copied or transmitted. The blocks that make up this book are arranged in chronological order.

Related: Decentralized vs. Distributed Network Explanation

The parties with whom you share blockchain information are called nodes. You will find several different functions in each block, including the hash of the previous block (or a unique algorithm) and its own hash (which passes to the next block in the chain). Each block must contain its own hash, but it can also have any necessary information that network developers want. But we will not delve into the contents of the block here.


Blockchains exist in a peer-to-peer network (as you can tell by their distributed structure) and can be public or private. In a private blockchain, all users are anonymous. They are not in the public blockchain. You can also get a blockchain consortium in which there may be multiple organizations and their data or assets.

So now that we know what a blockchain is, let’s see exactly how they work.

How do blockchains work?

purple blockchain scheme

Any movement of an asset in a blockchain, also known as a transaction, is recorded in the block. Adding each block and transaction is irreversible, keeping the chain completely accurate.

When the first block in a blockchain is created, its hash is created simultaneously. To continue recording these transactions, more blocks are needed that would have been impossible to create without Miner’s help.

Miners help build on the blockchain by mining new blocks. Miner adds data to the new block and creates a new hash, thus adding it to the chain. Miner must perform a mathematical equation to check the blocks and make sure they are accurate.

When a mining node creates a new block, it is instantly sent to every other node or user on the network (in other words, it spreads). The nodes should then check the block transaction. This whole process is known as proof of how the mechanism works.

Read more: Proof of work versus proof of share: an explanation of cryptocurrency algorithms

This process together with the blockchain structure makes the data in each block secure and immutable. Blockchain is hard to crack, so this technology is becoming increasingly popular in the data warehouse. This is due to the cryptographic signature of each transaction, which always remains unchanged.

Using Blockchain Tech

What is interesting about blockchain technology is that it is extremely versatile and we can use it in a variety of fields. Of course, blockchain technology is known mainly for using cryptocurrencies in the market to record transactions. However, blockchain technology is now also used in some other sectors.

Today you will find blockchains used in real estate, medical data storage, voting systems and many other organizations. Several huge companies use blockchain technology, including Microsoft, Amazon and JP Morgan. The list of its applications is really endless.

The future of Blockchain is bright

Whether or not cryptocurrency survives over the next few decades, blockchains will no doubt continue to serve in several ways. Their ability to provide increased security and a transparent, reliable data network makes them the best choice for a variety of companies. Who knows, one day blockchain technology could replace all other options for storing and recording data.

Top 5 problems with blockchain technology

Is blockchain technology really better for those who demand transparency?

Read on

About the Author

Leave a Comment