How Blockchain Works: Blockchain Explained

Blockchain has revolutionized the way data can be shared because the data can’t be hacked or deleted.  

For businesses, blockchain promises transparency, security and communication with partners from all around the world. It can support everything – starting from supply chains, real estate deals and ending with healthcare and educational data sharing.

Are you interested? Then read further. This article is for you.

What is Blockchain?

Blockchain literally has a  block and chain format where information is secured and held by chains of code. 

Blockchain definition is simple – it just stores information in blocks that are linked together and form a chain. Once you have your data recorded inside of a blockchain, it’s almost impossible to change or hack. Of course, you can find more sophisticated explanations or more simple ones called blockchain for dummies or nooks. But I would advise you to look at the visual below and everything will become crystal clear:

what-is-blockchain- Blockchain Explained

Blockchain Database

Each blockchain can be considered as a database, but it doesn’t work vice versa. A blockchain stores information in data structures(block) but a traditional database is a structure that stores information.  


  A blockchain database advantages are:

  • Decentralized transactions with higher security.
  • Not a single entity has control over the database.
  • Allows free transactions all around the world
  • Prevents data loss
  • Is highly secure

A blockchain database disadvantages are:

  • A limited number of transactions.
  • ​​Along with a blockchain’s growing size, it becomes slower and less efficient

Although a blockchain can contain any information, it’s not recommended to store vast amounts of data as the network has limitations and is quite expensive. It can record anything – like rights to intellectual property, financial accounts, patients’ medical history, job recommendations and, etc.

A Distributed Blockchain Ledger


 A distributed ledger is a type of database that is shared across multiple sites and is accessible by different people from different geo-locations. All additional charges made to the ledger are copied and visible to all participants. The key points to understand and remember, are:

  • It is accessible across different sites by multiple participants.
  • There is no single authority that can control the process.
  • ​Blockchain uses underlying distributed ledgers
  • Reduces fraud and cyber attacks.

Blockchain Network

A blockchain network provides ledger and smart contract services to applications. The users of applications are the end users. A number of organizations may form a network that operates under policies that are agreed ahead. There are four types of blockchain networks:

  • Public blockchain network that anyone can participate in but has week security and little privacy 
  • Private blockchain network is a decentralized network where one organization controls the network
  • Permissioned blockchain networks that put restrictions on participants.
  • Consortium blockchains that multiple organizations control or maintain. 

Decentralized Blockchain

 Blockchain provides a solution to participants who don’t know or trust each other to record and monitor transactions.

Blockchain is based on cryptography, which prevents data from being tampered with or manipulated by third party users. 

  High security is one of the main blockchain’s advantages. The data is not stored in one computer but spread across multiple ones. Each time a new block is added to the blockchain, all the network computers update their blockchain. Decentralization makes it more difficult to tamper with information or hack the whole chain.

Additional Information

  The key concepts of blockchain are:

  • Shared ledger – transactions are recorded once.
  • Permissions – transactions are secure and verifiable.
  • Smart contracts – a set of rules that execute during a business transaction.
  • Consensus – all participants agree to the verified transaction. 


  Each blockchain participants are:

  • Blockchain users – participants with permission to conduct transactions with other participants.
  • Regulators – users that have special permissions.
  • Blockchain network operators – users who have any authority to create, manage and monitor the network.
  • Certificate authorities – users who issue different certificates for running blockchain transactions.

Blockchain Stocks

The simplest way to invest in the blockchain is to pick a publicly traded company that includes a blockchain into its operations or offers blockchain-related services to its customers. Some companies are focused solely on blockchain or cryptocurrencies, others use blockchain products and services for an existing business.
Blockchain stock companies have offers for everyone:

  • Visa (NYSE:V)
  • CME Group (NASDAQ:CME)
  • Nvidia (NASDAQ:NVDA)
  • Advanced Micro Devices (NASDAQ:AMD)
  • SolarWorld (OTCMKTS:SRWRF)
  • Bitfarms (OTCMKTS:BFARF)

Blockchain Supply Chain


Blockchain provides security and transparency that are highly beneficial for the supply chain. Supply chains are quite complex – including production, logistics, advertisement, sales, customers, and more. As there are many visible and hidden steps and stages in the supply chain, it is difficult to monitor it or develop trusted partnerships. Blockchain solves supply chain trust issues and offers transparency.
The main benefits of using blockchain in the supply chain are:

  • Increased transparency
  • Real-time visibility
  • Accelerated supplier onboarding

Blockchain and AI'


How can blockchain and AI are related? They are two trends that can enhance the capabilities of each other.

Here are how AI can be implemented in the blockchain:

  • AI software identifies on one device a participant’s look and uploads it to the whole chain making the facial recognition model easier
  • AI implementation allows sharing data across multiple business partners or participants. For instance, small businesses can share with each other personalization information in a blockchain to hold out against bigger competitors. 
  • AI and encryption work very well together. AI needs to build algorithms that work with data while in an encrypted state. As blockchains are perfect for storing highly sensitive and personal data, it’s logical to merge it with AI.
  • Blockchain can help tracking and understanding decisions made by AI. Blockchains will help to achieve transparency and provide insights into robots’ minds.

Blockchain IoT

  The Internet of Things (IoT) connects places, people and products but has a number of technical concerns. Blockchain can help solve security and scalability issues associated with IoT:

  • Build trust – as a blockchain is a tamper-proof and highly secure system no single participant will have control over the data collected and managed by IoT.
  • Additional security – blockchain provides highly secure encryption that would allow storing IoT data. 
  • Greater transparency – anyone who has authorization to access the network can track the transactions. This allows to identify any data leakages and take quick action.
  • Faster transactions – blockchain will support the processing of massive numbers of transactions.
  • Cost-effectiveness – it reduces the costs by eliminating the IoT processing. Some current blockchain-IoT players and their use cases

Industries That Blockchain Will Change

  With time blockchain will affect a wide range of industries including:

  • Banking and Finance: With blockchain, payments will be processed quicker and without any intermediate fees. 
  • Healthcare: Blockchain will allow storing and transferring patients’ healthcare records and healthcare history or collaborate on medical research.
  • Cybersecurity: Blockchain provides a secure way of storing data and information and makes hacking almost impossible. 
  • Voting and Politics: Blockchain will eliminate voting fraud. 
  • Insurance: It is perfect for the safe management of sensitive and personal data, the industry is ideal for implementing blockchain.  
  • Real Estate: It will make transactions faster without involving third parties. 

Share This Post

Share on facebook
Share on linkedin
Share on twitter
Share on pinterest
Share on email


Narine Nazaryan is a digital marketing specialist with more than 5 years experience in the field and more than 10 years experience in the banking and finances spheres. She is an obsessed reader and content writer. Her hobbies include coding, astronomy, physics and following the latest scientific discoveries. As it is obvious from this short bio, she doesn’t like bragging at all and is a very modest and pleasant person.

Subscribe To Our Newsletter

Get updates and learn from the best

More To Explore

A Deep Dive into Metaverse Marketing

Metaverse Marketing: What the Future Looks

Digital marketers need to be kept up to speed with the latest technological advances. And that definitely includes the metaverse. Let’s explore how marketing can be done in the metaverse.

Leave a Reply

Hey There👋

Let's Have A Chat!

Receive the latest news

Subscribe To Our Newsletter

Get notified about new articles from DGF