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Blockchain: What is Blockchain Technology And How Does it Work?



Blockchain Definition

The cryptocurrency Blockchain army marches on, routing the armies of money, trade and banking as the world knows them. Crypto appears to be winning, one battle at a time.

And if you’re like me and the other estimated 106 million people who are switching or have switched to the side of the advancing army, you want to grasp a clear understanding of what you’re signing up for.

That’s exactly why “blockchain” or “blockchain technology” and other related crypto jargon must be defined and explained in the clearest words possible. What is blockchain? How does it work?

If you must find out, keep on reading this simple-to-understand article.

Blockchain Technology 

Blockchain is a digital sequence of unique blocks that record information and transactions in a decentralized ledger that is shared across the involved networks.

It is a secure database, seeing that a copy of the same data is stored on each node across the entire network (N.B.: A node is a machine or computer that, based on how it has been programmed, runs like a human operator by transmitting blockchain information on the network).

Blockchain technology captures data from the initiator and receiver of a transaction, timestamps it for details and security and distributes them to the public (and so the public can’t make any changes to the ledger even though they can see it).

To put it bare, a blockchain is a chain of blocks. The blocks on the chain are mined by individuals or groups and the details of their workings are tracked, documented and securely stored in a digital ledger.

Remember that in accounting, a ledger is a principal book or a document like a Google Spreadsheet where account transactions are recorded in rows and columns.


Blockchain technology also generates a hash (a cryptographic signature that sees to it that a block is successfully added and accounted for by its unique record. They are made of long strings of numbers). The hash address distinguishes one transaction from the others and serves as a large aspect of proof of work.

(Proof of work: A cryptographic proof that makes the process of mining or recording transactions resistant to change, alterations, and other anomalies).

Distributed Ledger Technology

Blockchain technology and distributed ledger technology may be used interchangeably in some circles, but they’re not the same.

Blockchain is only a kind or type of distributed ledger (decentralized, not controlled by a central authority).

A distributed ledger is a database that exists between two or more participants across two or more locations. It is rare to find a company using this sort of ledger, you know—most groups or businesses use a centralized ledger.

So, while Blockchain’s ledger is distributed, blockchain is only a form of distributed ledger technology and not the entire concept; the distributed ledger is by no means restricted to blockchain technology.

Blockchain briefly X-rayed

This decentralized system uses a process called proof of work to build reliable and trustworthy transactions. So, each block has four major elements:

  1. The Previous Hash: The previous block has its hash. Working on a new block summons the previous block’s hash address.
  2. Details of all transactions carried out.
  3. Nonce: A unique number (that can be used no more than once).
  4. The new block’s hash: The aforementioned processes amount to the creation of a new hash address for the block.

This is not even near all there is to know about blockchain technology, but it is a good point to begin if you’re only a starter. But note that Blockchain technology is here and here to stay.

Key Take-home Points:

  • Block chain technology is a digital sequence of unique blocks that record information and transactions in a decentralized ledger that is shared across the involved networks.
  • Blockchain technology uses distributed ledger technology but must not be confused with it.
  • A block chain is a form of distributed ledger technology.
  • Every block has a unique hash address.
  • Block chain technology is decentralized and makes financial operations more secure from third-party intrusion or control.
  • It is perhaps impossible to change, hack into or alter transactions on the blockchain.


Fredrick Agaga is a blog writer and sales Copywriter with an uncanny obsession for cryptocurrency white papers. You may think that's an unpleasurable way to go, but not so for him. He lives for simplifying 'complex' ideas and sparking conversations with readable, engaging, and easy-to-understand content.