What is block chain technology ? How does Bloackchain Technology works ?

  • September 8, 2018
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Are you wondering about Block chain Technology? Are you digging out the information about what is Bitcoin? Then you are landed on the right platform. You might have heard this new technology called Block chain Technology in regards with Bitcoin and other crypto currencies. If you see block chain technology is a vital and critical element of crypto currencies, Bitcoin or any other crypto currencies wouldn’t be exist without Block chain Technology.

To get better insights and information about what is block chain technology, how does block chain technology works? Or uses of block chain technology, so stick with this blog.

What is Block chain technology?

In simple definition – block chain can be described as an append- only transaction ledger that means the ledger can be written with new block information without making any changes(can’t be edited or adjusted) to the previous block information. Here block is a digital record or a piece of information. Block chain can only be updated by consensus between the participants in the network. Whenever new block is added or entered, it can’t be erased. Because large number of computers are connected to the network and to reduce the access of attackers on the network, those added or entered blocks must solve the mathematical programme to precede with new blocks. The results are shared with all the connected nodes on the network. The nodes or computers connected to the network must agree on the solution, hence the term coined Consensus.

With block chain, users can write entries into a record of information and the community users can control how the record of information is amended and updated. Likewise, Wikipedia entries aren’t handled by one organisation or single users. No single person controls the information.

Yet, Block chain technology isn’t a new technology if you see, it is a combination of proven technologies applied in this technology era. The three technologies are – The Internet, private key cryptography and a protocol governing incentivization that made the Satoshi Nakamoto’s idea so successful, the creator of bitcoin.

Block chain as an example to a real world

One way is to think of block chain as one big ledger in the world. Now in the ledger… are very important, everything that you own including money but nothing it’s just a ledger. For example if you send a money from USA to a friend in India, it’s not a money which flies from USA to INDIA, it’s actually a ledger entry that happens in my ledger and another parallel entry that happens  in your friends ledger.

Now the problem however is that between my ledger and his ledger there are bunch of other ledgers there are bunch of ledgers owns by financial institutions, regulators and insurance companies and each of this ledgers has to be reconciled and changes and because of so many changes it creates frictions is time delay and obviously cost, 1lakh dollar send to my friend INDIA and it may be reached after 4 or 5 days later with an intermediaries deductions. Now imagine instead of this broken system, we have one universal ledger and all the participants what we talked in this senior are the parts or participants in this ledger, which are nodes in the ledger. And every time entry had to happen every and single nodes would have to authenticated.


Now this universal system of ledger is the heart of block chain. So a block chain whenever a new transaction happens all sort of transactions gets added on as one more block in a chain of already existing transactions, this transactions has protected by a amongst the best cryptography algorithms very difficult to hack.

The other important is that every block added is imputed link to the last block and that block linked to another block and so on. If you have to change one block or hackers comes in and wants to change one block in entire transaction of blocks he has to change the entire chain, trust me very difficult to hack, so here comes the super security features driven by consensus, driven by immutable.


“The blockchain is an incorruptible digital ledger of economic transactions that can be programmed to record not just financial transactions but virtually everything of value.”

~ Don & Alex Tapscott, authors Block chain Revolution (2016)


This also makes the work of appending data to the ledger decentralized. That means, no single entity can take control of the block or information on the block chain. We can’t trust a single entity since we rely on consent or agreement by many nodes or entities instead. The beauty of this construct is that the transactions recorded in the chain can be publicly published and verified, such that anyone can view the contents of the block chain and verify that events that were recorded into it actually took place.


Block chain as Google Docs – Come into the typography section

“The traditional way of sharing documents with collaboration is to send a Microsoft Word document to another recipient, and ask them to make revisions to it. The problem with that scenario is that you need to wait until receiving a return copy before you can see or make other changes because you are locked out of editing it until the other person is done with it. That’s how databases work today. Two owners can’t be messing with the same record at once. That’s how banks maintain money balances and transfers; they briefly lock access (or decrease the balance) while they make a transfer, then update the other side, then re-open access (or update again).With Google Docs (or Google Sheets), both parties have access to the same document at the same time, and the single version of that document is always visible to both of them. It is like a shared ledger, but it is a shared document. The distributed part comes into play when sharing involves a number of people.

Imagine the number of legal documents that should be used that way. Instead of passing them to each other, losing track of versions, and not being in sync with the other version, why can’t *all* business documents become shared instead of transferred back and forth? So many types of legal contracts would be ideal for that kind of workflow. You don’t need a block chain to share documents, but the shared documents analogy is a powerful one.”

~William Mougayar, Venture advisor, 4x entrepreneur, marketer, strategist and block chain specialist.


How Does Block chain Technology Work?

The result is a system for digital interactions that does not need a trusted third party. The work of securing digital relationships is implicit — supplied by the elegant, simple, yet robust network architecture of block chain technology itself. As we stated in the beginning, Block chain technology is consist of three principal technologies. The technologies are –

  1. Private Key cryptography
  2. Distributed network with ledger
  3. Record keeping & security

Following are the explanation on how these technologies work to secure digital relationships.

Cryptographic Keys

Just take an example two people wants to transact over the internet. Both are having their own private and public key. Here the main security lies in block chain technology is to create a secure digital identity reference. Identity is based o the possession of a combination of private & public crypto currency. Combination of these keys makes the digital signature which provides strong control of ownership.

Distributed Network

A distributed network has no central organizing factor or central server. Each node acts as a server for others, without the need for any hosts. The more distributed a network is, or the higher the node count it has, the more resilient it is to outside attack. Likewise, the risk that a central factor of the network, becomes too dominant, is mitigated by numerous nodes.

Distributed system intends to solve the issues faced by centralized and decentralized systems through a variety of innovations. All the nodes in the network, no matter their processing power, will have the opportunity to contribute to security, receiving reward for their effort.

distributed network-block chain

So block chain is one of a distributed ledger. Distributed ledgers use independent computers or referred to as nodes to share, record and synchronize transactions in their respective electronic ledger rather than keeping data centralized as in a traditional ledger.

System of record

When cryptographic keys are combined with this network, a super useful form of digital interactions emerges. The process begins with A taking their private key, making an announcement of some sort — in the case of bitcoin, that you are sending a sum of the crypto currency — and attach it to B’s public key.


A block – containing a digital signature, timestamp and relevant information – is then broadcast to all nodes in the network.

Network servicing protocol

A realist might challenge the tree falling in the forest thought experiment with the following question: Why would there be a million computers with cameras waiting to record whether a tree fell? In other words, how do you attract computing power to service the network to make it secure?

For open, public blockchains, this involves mining. Mining is built off a unique approach to an ancient question of economics — the tragedy of the commons.

With blockchains, by offering your computer processing power to service the network, there is a reward available for one of the computers. A person’s self-interest is being used to help service the public need.

With bitcoin, the goal of the protocol is to eliminate the possibility that the same bitcoin is used in separate transactions at the same time, in such a way that this would be difficult to detect.

This is how bitcoin seeks to act as gold, as property. Bitcoins and their base units (satoshis) must be unique to be owned and have value. To achieve this, the nodes serving the network create and maintain a history of transactions for each bitcoin by working to solve proof-of-work mathematical problems.

They basically vote with their CPU power, expressing their agreement about new blocks or rejecting invalid blocks. When a majority of the miners arrive at the same solution, they add a new block to the chain. This block is time stamped, and can also contain data or messages.


Here’s a chain of blocks:

The type, amount and verification can be different for each blockchain. It is a matter of the blockchain’s protocol – or rules for what is and is not a valid transaction, or a valid creation of a new block. The process of verification can be tailored for each blockchain. Any needed rules and incentives can be created when enough nodes arrive at a consensus on how transactions ought to be verified.

It’s a taster’s choice situation, and people are only starting to experiment.

We are currently in a period of blockchain development where many such experiments are being run. The only conclusions drawn so far are that we are yet to fully understand the dexterity of blockchain protocols.

The blockchain is going to give the internet users the ability to create a value and provide authentic digital information. So what where will be the applications or uses of blockchain will lie?

  • Crowd Funding

Distributed ledgers enable the program or coding of simple contracts that will execute when a particular or specified conditions are met.

  • Governance

Distributed database technology could bring a fully transparency to elections or any other kind of election poll taking, as technology provides full transparency and publically data accessible.

  • File Storage

Decentralization is the main key feature of blockchain technology as distributing data through the network protects data from unethical access or hacked or data lost.

  • Protection of intellectual property

Smart contracts will protect the copyright and automate the sale of creative works online, eliminating the risk of file copying and distribution.

  • Identity Management

In this digital era, authentic identity is very important. Distributed ledgers offer enhanced methods for proving the identity like who you are, along with possibility to digitize your legal documents. In the sharing economy, having a secure identity will also be an important for digital interactions.

  • KYC and AML

Know your customer and Anti-money laundering practices has such potential for being adopted to the blockchain technology. Currently, all financial institutions have been performing labour intensive multi-process for every new customers, KYC costs could be reduced through cross-institution client verification and at the same time could increase monitoring analysis effectiveness.

  • Data management

In the coming future, users can have the ability to manage their digital data or activity where they have power and rights to sell their own data online as it can be easily distributed in small fractional amounts Like Bitcoin or ethereum.

  • Stock trading

Blockchain technology is going to change the way how financial institutions work. When executing peer-to-peer, trade confirmations could become almost instantaneous that means it will eliminates the intermediaries.

"This is Shantanu Sharma, A Google Certified - Digital marketing specialist, is a veteran of creating and managing digital content to build relationships for organizations and individuals, is also the author of this blog." Social media, Google, Marketing where he talks about, this is a bit of copy about him ... That's not giving you a lot of detail, is it? So lets connect to learn and share Facebook | Twitter | Instagaram

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