2.3 k

Blockchain Technology – Everything you Need to Know

Anyone in the financial technology space must have heard about blockchain technology. However, not many people know how it works and the technology behind it. Blockchain technology is an invention of an anonymous individual or a group of people under the pseudonym Satoshi Nakamoto which powered the first cryptocurrency, Bitcoin, released in 2008. Technology has been in play ever since.

Since blockchain technology release, the IT industry has massively evolved. However, several people are still skeptical due to a lack of understanding of this groundbreaking technology. Let’s break it down for an easier understanding of what it’s all about.

Blockchain Definition 

Blockchain is a chain of encrypted blocks that contain information. Each block has a cryptographic hash that is managed by a cluster of computers. 

Storage Structure

A blockchain collects and stores data in groups called blocks. Blocks have specific storage capacities, and when filled, they are chained onto a previously filled block, forming a chain hence the name blockchain. Any new information freshly added is compiled into a newly created block. The filled block is then added to the chain when filled.

Blockchain has three major concepts: blocks, nodes, and miners.

  • Blocks 

Blocks store data in the chain. The information on blocks depends on the blockchain type. Blocks contain 32-bit whole numbers called nonces that are randomly generated at the block creation. The nonce generates the block identifying header known as a hash. The hash is a 256-bit number wedded to a nonce. It’s uniquely tied to every information it holds, and any change in the information in the block will also update the hash.

It’s easy to know if the block’s information has been tampered with because all you need to check is if the hash has changed. Blocks ensure the network’s safety and any change is immediately noticed and tracked, thus affecting its verification.

  • Network Nodes

Nodes are connection points that create, store, and send data across a network. Nodes are accessible on devices where blockchain software is installable and can access Bitcoin, e-wallet, and other Bitcoin-related services.

Below are the types of nodes:

Full nodes: Full nodes verify the incoming blocks and store all the data in the blockchain. Full nodes need ample storage space for them to hold the blockchain. 

Partial nodes: Partial nodes, also known as light nodes, verify the incoming blocks but lack adequate storage space for the blockchain.

Users perform activities such as making transactions, receiving and transmitting transactions, tracking, and verifying transactions.

  • Miners

Mining is an integral part of cryptocurrency that generates and releases new cryptocurrency tokens for circulation. Additionally, mining helps verify, authenticate, and add the ongoing transaction to a public ledger. 

Miners perform an activity known as proof of work. The first miner to do a proof of work for blockchain generates rewards in Bitcoin. The goal of proof of work is to prevent miners from duplicating coins they didn’t earn.

Mining is a costly process because it requires a vast amount of computing power.

How Proof-of-Work Functions

Proof of work is an algorithm that secures cryptocurrencies such as Bitcoin or Monero. The function helps solve the problem of double-spending, which is difficult to solve without a ledger. If the user can double-spend a coin, the coin becomes unpredictable and worthless. Additionally, double spending inflates the overall supply debasing everyone else’s coin.

Other ways to ensure blockchain secure networks include peer-to-peer networks, hashing, and work proof. Hashing acts like a unique fingerprint to the blocks that help identify it and the information it contains. Proof of work and peer networks decentralize the network from a single entity.

Peer to Peer Network

Peer-to-peer (P2P) is a decentralized platform whereby two individuals interact to buy and sell goods or services to each other. The platform has access for anyone to join. One becomes a node after joining the blockchain and has a full copy of the blockchain. In case of a change in the blocks, all nodes with access to the blockchain notify them that the transaction is legitimate. 

Importance of Blockchain

Sharing information through online platforms has been made decentralized over the years. However, when it comes to transferring valuables like money, ownership rights, and intellectual properties, one is forced to fall back to centralized institutions like banks. There are also online centralized institutions like PayPal that require integration with a bank account.

Blockchain ensures such ‘middlemen’ are never required for any single transaction to happen. Blockchain achieves decentralization through recording transactions, establishing identity, and establishing contracts. The technology ensures a massive increase in inefficiency.

Blockchain can store any digital information, including computer codes. The users could program the codes to become “smart contracts” that create automatically filled contracts when certain conditions are met. Smart contract possibilities for their use are endless. The codes are read from external data feeds, stock prices, weather reports, news headlines, and anything parsed by a computer.

Is Blockchain Secure?

When it comes to security, blockchain has its users covered. The digital world is filled with hackers looking to breach information. The blockchain’s massive security features make it impossible to hack.

Another critical aspect of blockchain is its transparency. Therefore, everything is displayed on the network, minimizing the chances of a discrepancy. Blockchain is also inexpensive compared to other traditional financial models. Furthermore, economic efficiency is increased by this decentralized platform. The non-involvement of third parties aided in saving a lot of money and has reduced security risks when making transactions, unlike the centralized platforms.


Bitcoin live price
price change

Blockchain technology has taken the digital transaction market by storm, and it seems to be the future of digital transactions. Blockchain creates an immutable and permanent record of every transaction. This impenetrable digital ledger prevents fraud, hacking, and data theft. This technology has positively influenced several industries in the world. The industries affected include transportation, healthcare, and real estate companies such as Google, Microsoft, American Express, Hitachi, and Walmart. These companies are working to become early adopters of blockchain. Users of the traditional ledger system will only evolve as technology evolves.  

Stay up to date with our latest articles

More posts

Malicious Attacks on Smart Contracts that Auditors Can Easily Identify

With many businesses adopting blockchain technology and Smart Contracts, offering reliable security audits in the industry has become increasingly important.  Businesses may protect their assets and contracts by recognizing and preventing harmful assaults. This blog post will explore the different attacks a group of criminals can carry on Smart Contracts. We'll also look at real-world instances of assaults to help you secure your contracts. What are Smart Contracts? Understanding the Benefits of This Technology What are smart contracts? They are…

How Smart Contract Audit Can Help Prevent Hacks

As companies move toward implementing smart contracts, the need for technical audits becomes increasingly essential. Having a third-party auditor check your contracts for vulnerabilities can prevent your company from suffering from a hacking attack.  What are Smart Contracts? A smart contract is a script that automatically carries out a contract's provisions. Smart contracts are self-executing, meaning that once the system verifies the meeting of pre-determined conditions, the contract will automatically execute. This eliminates the need for intermediaries such as lawyers…

Understanding the GameFi Phenomenon

The GameFi industry is changing the way people think about gaming and finance. It provides a new way for gamers to interact with each other and earn money. It is also giving people a new way to invest their money.  The GameFi industry has the potential to change the way these industries operate. This guide will look more closely into this new business, covering several features. What Is the GameFi Sector? The GameFi sector is a crypto-based industry that uses…

How to Spot a Pump and Dump Scheme in the Crypto World

Cryptocurrencies have taken the world by storm, with their values skyrocketing over the past years. This has led to a huge rush of investors ignoring how to recognize a pump and dump operation. As a result, many people have lost money by investing in fraudulent schemes. This guide will teach you how to identify a pump and dump scheme and protect yourself from becoming a victim. We will also provide tips for spotting legitimate cryptocurrency investments and advise you on…

Understanding the Difference Between Solo Staking and Pool Staking

Solo staking and pool staking are two of the most popular methods of mining cryptocurrency. But what are they, and which is suitable for you?  This post compares solo and pool staking so you can choose the optimal strategy. What is Solo Staking? Solo staking is when users stake their coins by themselves to receive block rewards. By having a staking wallet online, you may receive incentives.  The main advantage of solo staking is that users get to keep all…

What is Web 5? Jack Dorsey’s Alternative to Web 3

On June 10th, Jack Dorsey announced a new project being built by Block’s bitcoin-focused business unit, TBD. That project is known as “Web 5” – a so-called “extra decentralized web” that “puts you in control of your data and identity.” What could the Block Head have in mind with this new creation? Also, what happened to Web 3? A Decentralized Data Storage Solution When Jack Dorsey announced Web 5 over Twitter, he said it would be Block’s “most important contribution…

Ethereum Name Service (ENS) – A Simple Guide

People can choose domain names that are easy to remember for their wallet addresses, thanks to the Ethereum Name Service (ENS). The secret to this technology is using a computer to understand this domain. When it comes to Web3 communication, ENS has the potential to make all the difference. In this guide, we'll go through some possible reasons for this. Ethereum Name Service (ENS) – A Definition To find out what a specific Ethereum address is, people can use the…

What is Tornado Cash, and How Does It Work?

Decentralized and non-custodial, Tornado Cash is an Ethereum-based solution for privacy and anonymity. Severing the on-chain link between those who send and receive coins enhances transaction anonymity.  This guide will provide our readers with more insight into Tornado Cash. We will start with a general introduction and move deeper into how Tornado Cash works. We will also add a list of pros and cons to this system for the reader's benefit. Understanding Tornado Cash Decentralized protocols such as Tornado Cash…

What Is the Blockchain Scalability Trilemma?

In the context of decentralization, security, and scalability, the Blockchain Trilemma refers to the generally held notion that decentralized networks can only deliver two of the three benefits at any given moment. In this article, we more closely into the matter, assessing all the most relevant aspects of the blockchain scalability trilemma. The Trilemma Vitalik Buterin invented the term "blockchain trilemma," which refers to a conundrum that blockchain engineers face while balancing three competing demands at once: decentralization, security, and…

Do Smart Contracts Represent Legal Contracts?

When industry players use the term "smart contracts," they may mean different things. Words matter, as any contract lawyer will be able to explain. Is the word “contract” a technical overstatement, or does it trigger actual legal bindings? The industry needs to agree on the consistency of its terminology. What exactly is a smart contract? Does it have any legal implications? When attorneys and technologists use this terminology, do they understand each other? Our article will provide a short analysis,…