beginner's guide to understanding how blockchain works

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beginner's guide to understanding how blockchain works

Posted By Alden Wolfe     Jan 10    



Blockchain technology has been a buzzword in the tech world for the past few years, but many people still don't fully understand how it works. This beginner's guide aims to provide a comprehensive overview of the basics of blockchain technology, including its history, key concepts, and real-world applications. By the end of this article, you should have a good understanding of how blockchain works and how it is being used in various industries.

What is Blockchain?

Blockchain is a decentralized, distributed database that records transactions between parties in a secure and transparent manner. It is a digital ledger of transactions that is maintained by a network of computers rather than a single central authority.

History of Blockchain

Blockchain technology was first introduced in 2008 by an anonymous person or group of people known as Satoshi Nakamoto. It was initially developed as a platform for the digital currency, Bitcoin, but it has since evolved and is now being used in a variety of industries.

Key Concepts of Blockchain

There are several key concepts that are important to understand when it comes to blockchain technology.

Decentralization: As mentioned, blockchain technology is decentralized, meaning it is not controlled by a single central authority. Instead, it is maintained by a network of computers, or "nodes," that work together to validate and record transactions.

Distributed Ledger: A distributed ledger is a database that is stored across a network of computers, rather than on a single server. In a blockchain, the ledger is distributed across all the nodes in the network, making it nearly impossible to hack or manipulate.

Cryptography: Blockchain technology uses cryptography, or the practice of secure communication, to ensure the security and integrity of transactions. Cryptography involves the use of complex mathematical algorithms to encrypt data, making it nearly impossible for outsiders to access or alter it.

Consensus: In order for a transaction to be added to a blockchain, it must be validated by the majority of the nodes in the network. This process is known as "consensus," and it helps to ensure the integrity and security of the ledger.

How Does Blockchain Work?

Now that we've covered some of the key concepts of blockchain technology, let's take a closer look at how it actually works.

A transaction is initiated: When two parties want to make a transaction, they create a digital "block" that contains information about the transaction, such as the amount being transferred and the parties involved.

The block is verified: The block is then sent to the network of nodes for verification. The nodes use complex algorithms to verify that the transaction is legitimate and that the parties involved have the necessary funds or assets to complete the transaction.

The block is added to the blockchain: If the transaction is verified, it is added to the blockchain as a permanent record. The block is linked to the previous block in the chain, creating a continuous and secure record of all transactions.

The transaction is completed: Once the block is added to the blockchain, the transaction is complete and cannot be altered or reversed.

Types of Blockchain

There are several different types of blockchain, each with its own unique characteristics and applications.

Public Blockchain: A public blockchain is a decentralized network that is open to anyone who wants to participate. Anyone can view, validate, and add transactions to the blockchain, making it a transparent and secure platform.

Private Blockchain: A private blockchain is a decentralized network that is only accessible to a select group of users. It is typically used by organizations that want

to have more control over their transactions and data, such as banks and financial institutions.

Consortium Blockchain: A consortium blockchain is a decentralized network that is managed by a group of organizations rather than a single entity. It allows for a certain level of control and collaboration among participating parties, while still maintaining the security and transparency of a blockchain.

Hybrid Blockchain: A hybrid blockchain is a combination of a public and private blockchain. It allows for both public and private transactions to take place on the same network, depending on the specific needs of the users.

Real-World Applications of Blockchain

Blockchain technology has the potential to revolutionize a wide range of industries, including finance, healthcare, supply chain management, and more. Here are just a few examples of how blockchain is being used in the real world:

  • Financial Transactions: One of the most well-known uses of blockchain is for financial transactions, such as the exchange of digital currencies like Bitcoin. Blockchain allows for secure and transparent financial transactions, without the need for a central authority.
  • Supply Chain Management: Blockchain technology can be used to track the movement of goods and materials through the supply chain, from the point of origin to the final destination. This can help to reduce errors, increase efficiency, and improve transparency in the supply chain.
  • Healthcare: Blockchain can be used to store and secure electronic medical records, allowing for better data management and improved patient care. It can also be used to track the movement of pharmaceuticals through the supply chain, helping to prevent counterfeiting and ensure the safety of medications.
  • Identity Management: Blockchain can be used to create secure and immutable digital identities, which can be used in a variety of applications, such as voting systems and credit scoring.


Blockchain technology has the potential to transform a wide range of industries and has already had a significant impact on the way we think about data management and transactions. While it is still a relatively new technology, it is quickly gaining traction and is set to revolutionize the way we do business in the digital age. Hopefully, this beginner's guide has provided a good overview of how blockchain works and how it is being used in the real world.