What is the Blockchain technology and how it works?

What is the Blockchain technology and how it works?

» What is the Blockchain technology and how it works?

What is the Blockchain technology and how it works?

In this article, we will explain what is blockchain technology and with simple illustrations, we show how it works, and you will also learn from what 4 main technologies blockchain exists.

1) Blockchain as a technology. It is a technology for storing and coordinating data between participants who do not trust each other.

2) Blockchain as an instrument. Blockchain technology it’s a decentralized database, that stores the registries and transactions across a peer-to-peer network. These transactions locked in blocks with data cryptographically linked together and secured.


What is the difference between a centralised database, cloud database and blockchain?

Centralised database scheme

Centralised database scheme


Cloud database (scheme)

Distributed database (scheme)


Transactions fall into the registry, which is distributed, simultaneously stored and updated on a large number of computers around the world (these computers are called nodes). Due to the fact that the registry is distributed among thousands of computers, it can not be hacked (unlike a classic server). 

Transactions form blocks that are interconnected and protected by cryptography. By interconnecting blocks with each other, the blockchain structure allows maintaining the integrity of all data (you can not change the data in the past). Hence this forms the origin of the blockchain’s name – “chain of blocks.”

How blockchain works (scheme):

How blockchain works (scheme)

Nodes collect transactions data and after a certain amount of time (from a few seconds to several minutes) form a block of transactions that are synchronized between other nodes.

The Node which forms the block receives a fee from the commission for transactions between the participants. The consensus mechanism means the principles on which the nodes interact with each other, and on which the winning node is determined

Each block consists of:

  • Unique ID;
  • Block’s hash (cryptographic snapshot);
  • The time when the block is formed;
  • Filling of a block (for example, a list of transactions).


The blockchain is built on 4 main technologies:

1) Private key cryptography

2) Peer-to-peer network or direct transactions between users (P2P Network)

3) Consensus Mechanism

4) Distributed Ledger


We will describe these technologies in more detail on the page The basics of blockchain technology.


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