Mechanics and Process: Learn How Blockchain Works



Research indicates that more than 70% of businesses believe that blockchain technology has the power to transform companies and raise standards in the next few years. Today, blockchain makes affordable and faster transactions possible.

In fact, blockchain has become synonymous with robust security, traceability, and a high degree of transparency. But the mechanics of blockchain often puzzles individuals without an IT background.

What Exactly Is Blockchain?

Blockchain is essentially a data storage technology for the financial industry. At its core, blockchain refers to a recording system for complex data that no one can cheat, hack, or alter. You should think of the blockchain as a digital ledger of distributed and duplicated transactions across the network of a decentralized computer system.

Technically, each block in the blockchain comprises multiple transactions. It means when a transaction takes place in the blockchain system, a new transaction record becomes part of the ledger.

Blockchain revolves around a decentralized database that takes care of multiple participants in DLT (distributed ledger technology. Blockchain is ultimately a DLT type where you record transactions with a highly secure cryptographic signature known as a hash.

Some of the hallmark features of blockchain technology include:

Verification through digital signatures and cryptography

Blockchain uses digital signatures and cryptography to secure the identity of users and validate transactions.

A distributed and duplicated ledger to maintain the list of transactions

In the blockchain, transactions are distributed and duplicated on a decentralized network in real-time. It is a much more efficient way to record data than a traditional central server.

Records storage in a dedicated digital ledger

Participants can use blockchain to record and as well as encrypt transactions and exchanges like funds transfer or property ownership.

A P2P network that contains records of all transactions

The digital ledger of blockchain is accessible to just selective partners on the network. It allows these participants to share, update, and maintain the records.

No P2P network intermediaries

In the blockchain, there are no intermediaries in the main peer to peer trading network. It means there is no central authority or single point of control that can access the records. Similarly, third parties like banks and lawyers are also not involved in blockchain transactions.

Blockchain: Data Storage and Security

Blockchain data is stored in a manageable and secure fashion in order to grow its database. Blockchain follows a systematic and sequential process that adding the identifier of the previous block into the next block. The idea is to create an immutable and unbreakable digital chain.

Remember that it doesn’t matter how many blocks or participants you add – data will continue to be manageable and secure in the digital ledger. In technical terms, blockchain technology protects and manages data through hashing and consolidates data in Merkle Tree.

Blockchain: Authentication and Authorization of Transactions

It is normal to wonder how each transaction moves into the blockchain. In layman’s terms, before each transaction becomes part of the blockchain, the participant has to authorize and authenticate the transaction.

Sum Up

Blockchain continues to serve as the foundation for more advanced technologies. Although blockchain technology is more than a decade old, its newfound capacity can fuel future companies, projects, and technologies at a big scale.

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Jennifer Thomas
Jennifer Thomas is the Co-founder and Chief Business Development Officer at Cybers Guards. Prior to that, She was responsible for leading its Cyber Security Practice and Cyber Security Operations Center, which provided managed security services.