How Does Blockchain Technology Work; A Guide For Dummies

Cryptocurrency enthusiasts are familiar with blockchain technology. Bitcoins are attracting investors’ attention due to their sudden rise in value. In the small business environment, entrepreneurs are seeking opportunities to incorporate Bitcoin into their operations.

How does Blockchain work, and what exactly is it? The following guide will provide you with a simple explanation of how it works. Here are some of the points it covers:

  • 21st Century’s Greatest Innovation: Blockchain
  • Exactly what is it?
  • How it Works

21st Century’s Most Important Innovation: Blockchain

Blockchain is considered the most important innovation of the 21st century since it can distribute data without being copied. As the next big thing in the digital world after the internet, it is set to take over the world. Blockchain was invented for the purpose of resolving the cryptocurrencies’ double-spending problem. The purpose of this guide is to help you understand the basics of Blockchain Technology, its essential features, how it works, and how it can be used to your advantage. 

To learn more about block chain and cryptocurrencies, check out our resources on bitcoin and other cryptocurrencies.

Exactly what is Blockchain?

Blockchain, in its most basic form, is a series of time-stamped and immutable data that is periodically updated across a network of computers rather than by a single, centralized server. This network uses cryptographic encryption to encrypt data.

This decentralized system cannot be controlled by a central authority. A further advantage is that the data can’t be altered, the network is transparent, and the data can’t be deleted or duplicated. All network members are able to see data transactions. Let’s look at a simple example to understand it better.

So, How Does It Work?

Have you ever used an internet-based shared spreadsheet? Imagine that thousands of computers are sharing a spreadsheet. Changes made by any user on the network are visible to everyone. Let’s examine each of the three pillars of blockchain in more detail.

Blockchain: The Three Pillars

Transparency, immutability, and decentralization are three excellent features that make blockchain technology popular across different industries.

  • Transparency

People today are not aware of how important transparency is, when it comes to Blockchain Technology. The concept of transparency and privacy is confusing to them. It would be helpful if we clarified everything.

All transactions in the network can be seen thanks to the transparency feature. Cryptographic identity, however, ensures that it is impossible to determine who made the transaction.

If you check the transaction history for a person, you will see his/her public address instead of his or her name. Immutability is the third intriguing feature.

  • Decentralization

The centralized services were the only ones we knew before Bitcoin and BitTorrent. In a network, all information flow will be controlled by a central entity. You must interact with the central entity in order to get information from the particular database.

Traditionally, banking systems operate in a centralized manner. The only way to transfer money is through banks, so we don’t have much control over it. Decentralized systems, on the other hand, allow you to securely transact with other users without the involvement of a third party, such as a bank.

The introduction of this feature opened up the financial world to cryptocurrencies. Blockchain’s transparency makes it even more valuable.

  • Immutability

Once something has been added to the blockchain network, it cannot be changed. To allow it versatility in the finance industry, immutability is one of its best features. This simply means that it gives out a fixed-length output string after taking an input string.


Due to its decentralized nature and shared network, the blockchain is truly a public network. Since it is decentralized, it cannot be corrupted by hackers. Technology has therefore become the most popular way to keep track of financial transactions.