How does blockchain technology work?

The blockchain allows digital data to be distributed, not copied. In other words, when the question of what is blockchain technology is answered, the basis of a brand new and different type of internet is questioned.

Bitcoin, a cryptocurrency created by someone or persons nicknamed Satoshi Nakamato, has also taken its place in the global economy of the 21st century, as it works with blockchain technology, a system called blockchain. When addressing this issue in detail, it is necessary to look at the question of “what is blockchain” first.

What is blockchain technology and how does it work?

The blockchain allows digital data to be distributed, not copied. In other words, when the  question of what is blockchain technology is answered, the basis of a brand new and different type of internet is questioned. Although the purpose of this technology is only for Bitcoin, the business world finds potential uses for this technology. Since it was invented in 2008, Bitcoin has been operating thanks to the Bitcoin blockchain system without any hassle. Beneath the current problems are methodological errors or hacking efforts. These errors are either user errors or malicious people. In fact, in order to use this technology, you do not need to know how it works, like the phones and computers you have at your disposal. But the more you get used to this technological revolution, the more you understand why it is one of today’s most prominent inventions.

Distributed database

Imagine a room full of computers and a spreadsheet copied and distributed thousands of times to a network of these computers.  Note then that this massive network is designed to regularly update that spreadsheet. Now you have started to grasp the blockchain. Information in a blockchain continues to exist as a database that is constantly and regularly updated and shared. Thus, using this network in this way has some advantages. Records can be verified publicly and easily as the blockchain database is not maintained in a single specific location. So there is no central version of this information that can be accessed or corrupted by hackers. As it is hosted in millions of computers at the same time, everyone on the Internet has free access to the existing data in the database.

Blockchain reliability

The blockchain has an internal dynamism and robustness such as Internet technology. The blockchain cannot be controlled by a single organization, person or persons because duplicate data blocks are stored throughout the network. Besides, there is not a single breaking point.

Non-perishable structure and transparency

Blockchain is a system programmed to automatically update itself every 10 minutes. The network, a self-controlling digital system, regularly updates every transaction processed. Each of these operations is called a block. With this system, transparent data is embedded in the entire network and open to the whole world.

The other and most prominent feature is that to change any data in the blockchain, a processing power greater than the processing power available on the entire network is required. A computer with processing power that can break this network has an irreversible structure as it does not exist today. Although this feature is theoretically possible, it is impossible in the application sphere. For example; even if you take control of the entire system to collect Bitcoin, you will make the value of Bitcoins 0.

Nodal network

The blockchain system consists of nodes assigned to calculate. The question mark in your mind right now is, naturally, “What is a node?” A node is a computer that operates dependent on the blockchain network chain and runs a client that is responsible for approving transactions and transferring them to relevant locations. When nodes join chain networks, they automatically download an up-to-date copy of the blockchain. The nodes that come together form a second-level, highly powerful network that is completely independent of the current functioning of the Internet. Each node that joins the network has an administrator status above its blockchain and joins the network voluntarily. That is why the network has no center. However, each node is rewarded by the system for joining the network: A chance to acquire Bitcoin.

In fact, each node is competing with each other to solve computational puzzles. It should also be noted here that Bitcoin was initially at the heart of its blockchain. Today, it is only seen as one of the countless applications of this technology. In the system described below with the help of arrows, it can be better understood what happens when a process is performed.

What is the principle of blockchain operation based on?

  1. A user requests a transaction
  2. The requested transaction is published on a P2P network of computers known as nodes.
  3. Verification: The node network validates the operation and the user using algorithms.
  4. Verified transaction may include data such as cryptocurrency, contract, record, etc.
  5. After confirmation, the process is combined with other operations and a new data block is created for the registry.
  6. The new block is permanently and irreplaceably added to the existing blockchain.
  7. Transaction is completed.

Blockchain and cryptocurrencies

Today, there are more than 1000 crypto-currencies. Since the blockchain is a technology that does not have a central structure, everything that occurs in the blockchain affects the system.

A new way of verifying transactions, the blockchain overrides some of the features of existing trade, along with the new application areas it finds. For example, stock transactions can take place on the blockchain in seconds, documents such as cadastre, title deed etc. can be kept fully open to the public. The database that records cryptocurrency transactions is jointly managed by a massive computer network that uses blockchain technology. In other words, Bitcoin’s administrator is the network itself and the decentralized system operates through the user-to-user (P2P) procedure.


As a result, what blockchain technology does in its shortest and simplest terms; Blockchain offers Internet users the ability to create value and verifies digital information by an automatic, intact, decentralized system. So, who uses this technology? The most widespread use of the blockchain is currently in the financial world. The World Bank says the money transfers made in 2015 exceeded US $430 billion.

The blockchain is gaining more and more attention as it eliminated the intermediary function. Thanks to GUI (Graphical User Interface) desktop technology, a graphical user interface called “Wallet” (wallet) is widely used for blockchain usage such as permitting internet and computer usage to everyone.

These applications can be used for shopping or investing in cryptocurrencies over the internet. Authentication is the most fragile ring of online transactions. Registries embedded in the blockchain allow you to digitize improved methods and personal records to prove who you are. Online transactions are closely associated with authentication processes in this process. It is argued that wallet applications will pave the way for another type of authentication and management in the years to come.

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