What is Blockchain and how does it work

What is Blockchain and how does it work

What is Blockchain and how does it work

Definition of Blockchain

What is Blockchain and how does it work? Blockchain is a shared, unchanging digital office that simplifies transaction logging and capital tracking in a business network.
Blockchain is a system of recording information, making it difficult or impossible to change, hack, or cheat.
Each block in the chain contains several transactions, and each time a new transaction occurs in the Blockchain, a record of that transaction is added to each participant’s general ledger.
A decentralized database managed by several participants is known as Distributed General Ledger (DLT) technology.
In DLT, transactions are recorded with an unchanged encryption signature called a hash.
An asset can be apparent (cash, car, land, house) or actual (brand owner of a company or institution, patent, copyright).
Almost anything of value can be tracked and traded in a Blockchain network, reducing risk and costs for all complex cases.

Why is Blockchain important? – What is Blockchain , and how does it work?

All businesses are based on information.
The faster and more detailed this information is, the better.
Blockchain is ideal for providing that information.
It provides instant, shared, and explicitly stored information stored in an immutable general ledger accessible only to authorized members of the network.
A Blockchain network can track orders, payments, accounts, products, and more.
Because members have a single view of the truth, you can see all the deal’s details from start to finish, and you will trust it better.
Blockchain technology also offers you, new capabilities and opportunities.

How does Blockchain work?

Blockchain technology is a format that records the history of transactions and exchanges within a public block in several databases, known as “chains” in a network that is saved and connected by peer-to-peer nodes.
For this reason, as described above, it is known as the” Distributed ledger technology or DLT”
Every transaction and currency exchange in this DLT must be authorized by the owner’s digital signature, which identifies the transaction and protects it from tampering and alteration.
Therefore, digital head office information has a very high level of security.

Distributed ledger technology  - flashift
For example, a DLT can be a Google spreadsheet shared by countless computers on a network, where transaction records are stored based on actual purchases.
The interesting angle is that everyone can see the data openly, but they cannot corrupt or manipulate it.

What is the reason for the popularity of Blockchain?

Imagine you are transferring money to your family or friends from your bank account.
You log in to online banking and use someone else’s account number to deposit money.
Your bank will update the transaction records when the transaction is completed.
Sounds simple enough, right? There is a potential issue that most of us overlook.
Can be manipulated in these kinds of transactions efficiently and very quickly.
Users familiar with the subject are often wary of using these transactions, so third-party payment plans have become complete in recent years.
The main reason for creating Blockchain technology was to address this issue and address users’ concerns.
In terms of technology, Blockchain is a distributed ledger technology that has recently attracted attention.
But why has it become so popular?
Well, let’s look at it to understand the whole concept.
Recording data and transactions is an essential part of the business.
Often, this information is managed at home or sent through a third party such as brokers, bankers, or lawyers, which increases time, cost, or both in the business.
Fortunately, Blockchain avoids this lengthy process and facilitates faster transaction movement, thus saving time and money.
Most people think that they can use Blockchain and Bitcoin interchangeably.
But in reality, this is not the case.
Blockchain is a technology that can support various applications related to multiple industries such as finance, supply chain (activities required by organizations to supply goods or services to consumers), production, etc.
But Bitcoin is a currency that relies on Blockchain technology to be safe.
(If you want to know more information about Bitcoin we suggest you to read our article: Convert Bitcoin To Dollars and Bitcoin Network Fee.)
Blockchain is an emerging technology with many benefits in the growing digital world:

High security

It uses a digital signature feature to perform fraud-free transactions that make it impossible for other users to corrupt or alter a person’s data without a specific digital signature.

Decentralized system

Typically, transactions require the approval of regulatory authorities such as the government or the bank.
However, with Blockchain, transactions are done with the mutual consensus of users, which leads to smoother, more secure, and faster transactions.

Possibility of automation

This program is programmable and can automatically create systematic actions, events, and payments if all specified criteria are met.

Types of Blockchain

There are four different types of Blockchain, as follows:

Private Blockchain networks

Private Blockchains work on small networks that include a certain number of users who are only connected to each other, can communicate with each other, are not connected to the Internet and other computers, and are inclined to trade and good for private companies and work well.
Private companies can take advantage of private Blockchain to customize access and permissions, variable network features, and other essential security options.
The private Blockchain is managed by a single reference for a private Blockchain network.

Public Blockchain networks

Bitcoin and other cryptocurrencies originated from public Blockchains, which also played a role in the spread of distributed ledger technology (DLT).

Public Blockchains try to fix security flaws and network problems.
With DLT, information is transmitted over a peer-to-peer network instead of stored in a single location.
A consensus algorithm is used to verify the information to do this.
This algorithm is used to reach a contract on a single amount of information between distributed operations or systems.
Proof of stake (PoS) and proof of work (PoW) are two standard consensus methods.

Hybrid Blockchain

This type of Blockchain is also known as the authorized Blockchain.
Blockchain networks combine dedicated Blockchain s that allow special access for authorized individuals.
Companies typically set up these Blockchain s to get the best out of the digital and real world.
This type of Blockchain network provides a better organization to determine who can participate in transactions and the web.

Consortium Blockchain networks

Like authorized Blockchains, consortium Blockchain networks usually consist of several commercial companies with public and private components.
The only difference is that several institutions and companies manage an associative Blockchain network.
Because of being more complex during startup, these types of Blockchains offer higher security after implementation and are optimal for institutions.

The difference between (PoS) and (PoW)

As you know, Proof of stake (PoS) and Proof of work (PoW) are two standard blockchain algorithms.
These algorithms are used to control verifying users’ transactions and adding them to the distributed ledger technology (DLT).
But there are also differences between the two algorithms, which we will explain below.

Proof of work (PoW)

The proof-of-work algorithm is the first algorithm known as the Consensus Algorithm recognized in the Blockchain.
For this reason, some consider PoW to be the primary consensus mechanism in the Blockchain.
The Proof of Work protocol has been introduced as the safest approach to achieving Blockchain consensus.

The algorithm helped the Blockchain achieve decentralization while eliminating intermediaries and transaction validation.
However, the issue of scalability is a challenge in the proof of work protocol.
The proof-of-consensus algorithm requires miners to solve encrypted equations to validate a particular transaction.

Proof of work algorithm flashift

To better understand this, you can think of solving this equation as a quiz.
The first miner to solve the equation receives the network reward.
It is important to note that PoW consensus equations are very complex, and miners need complicated computational resources to solve these equations.

Proof of stake (PoS)

Problems with the PoW consensus have led to potential alternatives to a better agreement.
In fact, the PoS consensus algorithm was introduced to solve problems such as excessive energy consumption in the proof of work consensus.
In this algorithm, there is no relationship between the power of computers and their ability to solve equations.

In contrast, the PoS protocol focuses on determining participation based on the degree of ownership of digital currency.
Therefore, it can be said that in the stock proof protocol, computing power has been replaced by currency power.
then, the ability of nodes to validate transactions depends on the number of user sticks in the network.

proof of stake algorithm flashift

The proof-of-stake algorithm’s other performance eliminated the need for miners to extract cryptocurrency and create new blocks.
The PoS protocol randomly selects validators based on their stick level in the network.
Validators do not receive any rewards for block validation and only receive transaction fees or network fees.
The creditor is responsible for validating the transactions in the block, signing them, and proposing the block for validation.


Blockchain is a distributed digital general ledger that stores data of any kind at its core.
A blockchain can record information about digital currency transactions and ownership of Non-fungible tokens (NFTs).
While any conventional database can store this type of information, blockchain is unique because it is decentralized.
Instead of being stored in one place by a centralized administrator – think of an Excel spreadsheet or a banking database – many identical copies of a blockchain database are stored on multiple computers spread across a network.
These individual computers are called nodes.

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