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How does Block chain Technology Work

Bygone are the days where you exchange value hand to hand. Globalization in technology has made an impact on everything right from purchasing groceries to financial transactions everything is done online. Now, you don’t have to exchange money in personnel. Without any trust issues, you can send value to a person wherever they are with just a click. Keeping aside the concept of real money, Do you know there is virtual money. Yes, they are identified as Bitcoins. These are decentralized coins.

Many businesses are into Bitcoins because of their authenticity and integrity. The Bitcoin transactions are made irrespective of bank authorities ie, You don’t need any permissions to transact. These bitcoins works on the principle of ledger technology called Block chain.

Now, What is Block chain?

As earlier said, Block chain is a distributed ledger technology where each transaction is digitally signed. It ensures authenticity and integrity. A block chain is a data structure that stores the record of transactions made. The digital entries made are distributed amongst the infrastructure which is equipped with nodes and layers. These update a block whenever a new transaction is made. Nodes also have copies of previous ledgers. 

How does Block chain Technology work?

Before knowing how block chain technology works, you need to be familiar with few terms,


Nodes are a widespread network that performs various tasks. This is the foundation of technology allowing a block chain to survive to undergo transactions.

Digital signature

A combination of private and public keys to generates a digital signature to secure a transaction


A wallet is a record of transactions. On completion of the transaction, no personal details are displayed. It only displays a wallet address. Wallet address, in turn, is a public key


A block chain is made of a large set of a specification called protocol. The specifications induce secured transactions.


Miners are the nodes that solve the proof of work problems producing a block chain. When a block is accepted by consensus nodes and approved for the transaction then miner is rewarded with a coin.

Proof of work

Proof of work is nothing but successfully placing a block into a transaction.

Now getting to how it works,

Block chain is a combination of three technologies which aren’t any new. 

  1. Cryptographic keys
  2. Distributed network
  3. Incentive service network

Looking into each of these,

Cryptographic Keys

When a transaction is done between two people, each holds a key. A private key and a public key. The purpose of generating keys is to induce a secured digital identity. Identity is the combination of these two keys and creates a digital signature. A digital signature induces security and ownership. 

A transaction must be approved with the proper authorisation and it is done with a distributed network.

Distributed Network

A block chain is a large network where the validators reach the same consensus that witnesses the same things. These are verified with a mathematical verification. Security depends upon the size of the network. Block chain is carried out with huge power resources. A bitcoin is secured by 3,500,000 TH/s, more than 10,000 largest banks. Digital interaction is imposed when cryptographic keys are interacted with the network. A private key is taken and information is passed saying some amount of cryptocurrency is transferred. A private key is then attached to the Public key which displays a block with a digital signature and other transaction details which will then broadcast into all nodes of the network.

Incentive service network

A public block chain is transacted through mining. It needs a huge processing power to serve the network. When a transaction is completed, the computer is rewarded. This process is performed on self-interest to fulfill the public needs. Protocols detect and eradicate the usage of the same bitcoins in simultaneous transactions thereby eliminating the confusion. The nodes of the network record the history of transactions to solve the proof of work problems.

The amount and verification are done for each block to validate and confirm the transactions. Block chain displays the wallet number when a transaction is completed.


  • Tracks assets
  • Digital signatures reduce fraud rates 
  • Say no to transaction fees
  • Speed and verified transaction
  • Effortless business agreements
  • Nodes prevent from repeated transactions providing paramount security

Block chains are remunerative taking away the fraud. Block chains have occupied their special place in the financial system.You don’t need to worry about security, Block chains undergo transactions that are  secured with digital keys. 

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