How Exactly Does Blockchain Work: The Ultimate Guide

What is Blockchain? How exactly does Blockchain work? Are these questions revolving in your mind? Worry not; we are here! In this blog, we will explore what blockchain technology is and how it works. We will also be covering types of Blockchains and their examples. So, without further ado, let’s begin. 

First, let’s start by briefly understanding Blockchain. 

What is Blockchain: Meaning

Blockchain is a type of distributed ledger technology that makes it very hard, if not impossible, to change, hack, or otherwise change the information that has been recorded. A blockchain is a distributed database that keeps a copy of all transaction data on each node in the network.

  • In a distributed, peer-to-peer network, “blocks” of public transaction records (hence the name “blockchain”) are spread across multiple databases (hence the name “chain”).
  • The term “digital ledger” is often used to describe blockchain technology.

A digital signature made by the owner of the ledger verifies each transaction and keeps it from being changed. So, you can believe the information in the digital ledger.

The digital ledger keeps records of transactions based on actual purchases. It is like a collaborative Google spreadsheet that can be accessed from multiple computers in a network. The fact that anyone can look at the data but can’t change it is very interesting.

Second, let us explore the various types of Blockchains.


Types of Blockchain

There are various types of blockchains present. We will be discussing three of them here. They are as follows:

Private Blockchain Network

Private blockchains are blockchains that only a small group of people, like a company or organization, can use. Businesses have more control over data access, permission settings, network parameters, and other important security factors with private blockchains. A single person or group is in charge of a private blockchain.

Public Network Blockchain

Public blockchains, the underlying technology for Bitcoin and other cryptocurrencies, have also helped the decentralized ledger become more popular. When you use a public blockchain, it’s easier to solve problems like lack of security and too much power in one place. DLT uses a decentralized peer-to-peer network to store information instead of a central database. Proof of stake (PoS) and proof of work (PoW) are standard consensus algorithms that check that information is correct. 

Permissioned Network

Permissioned blockchain networks, which are additionally known as hybrid blockchains, are blockchain systems that only let users who have been verified in. Businesses often set up hybrid blockchains to get the best of both worlds. This makes it easier to keep track of who can use the network and what transactions they can do.

Next, let us move to the main part of our blog, i.e., the working of Blockchain. 

How does Blockchain work: Simply Explained

In the past few years, Blockchain technology has been used by a wide range of businesses. But how does this whole Blockchain thing work? Is this a major change or just a small one? Since Blockchain is still in its early stages but can potentially change the world, it’s time to learn more about it.

The Blockchain is a combination of three well-known systems:

  • Coding Identifiers
  • Peer-to-peer technology that uses a distributed ledger.
  • A computer system that logs and keeps track of network activity.

In cryptography, there are two kinds of keys: private keys and public keys. These keys make it easier for people to trust each other when they trade. Each person has their own set of these two keys. Together, they make a secure digital identity reference.

The most valuable thing about Blockchain is, without a doubt, that it can verify people’s identities. In the cryptocurrency world, this kind of ID is called a “digital signature,” it is used to authorize and control financial transactions.

The digital signature is built into the P2P system. Many people in power use the digital signature to agree on different things, like whether or not a transaction is legal. When they give the transaction the green light, it is confirmed mathematically. This makes the exchange between the two parties in the network safe. To sum up, users use cryptographic keys to communicate digitally with each other in the peer-to-peer network that is Blockchain.

Following this, let’s understand the importance of Blockchain.

Also Read:

What is Cryptography: A Guide to Security

Importance of Blockchain

Blockchain could change the financial services industry in a big way. Banks need to be more flexible in the digital age, and Blockchain can help them do that. Banks can use Blockchain technology to give their clients a safer and more convenient way to do business. Blockchain technology can also help financial institutions save money and work more efficiently.

Undeniably, you must have clearly understood Blockchain and its working by now.


To summarize, Blockchain is a distributed ledger that keeps track of transactions and makes it hard to change them after they happen. Cash and a house, which are both real and imagined assets, are written down. Even though Bitcoin and other digital currencies are the best-known uses of Blockchain, it is also being used increasingly in other fields where sensitive data needs to be kept safe. 

Blockchain makes it possible for users to connect in a safe, trustworthy, and open way. It makes it easy to keep records and share information without spending much money. 

To get a deep understanding of how Blockchain works step by step, you can take up a certification course in Blockchain. Visit for more information.

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