How Does Blockchain Work?

How Does Blockchain Work?

The blockchain is a distributed ledger that embeds contracts and transactions in digital code.

This digital code – and the record of these transactions – is stored in a transparent, shared database. This database is decentralized, which means it’s held by people (“nodes”) all over the world. This decentralized system protects the blockchain from tampering, deletion, and revision.

Using the blockchain, everything we do has a digital record. That means every process, transaction, task, and payment has a digital record. Each record can also be traced back to an individual: it has a signature that can be identified, validated, stored, and shared.

Ultimately, this allows organizations or individuals to conduct business in a more efficient way: with blockchain, we have a tamper-proof, verifiable, and permanent way to record transactions between two parties.

Could Blockchain Fail To Revolutionize The World?

There’s enormous hype in the world of blockchain right now. Blockchain startups are springing up every day. Many are comparing it to the internet revolution in the early 90s, when companies rushed to take advantage of the power of this dramatic new invention.

However, some – like the article mentioned above – cast doubt on the ability of blockchain to revolutionize the world. It’s far from a certain thing.

Some point to security issues outside of the blockchain – like the infamous 2014 Mt. Gox hack, when users lost $450 million USD worth of bitcoin.

Others point to the history of technological innovations. With most major technology changes, there needed to be a substantial technological, governmental, organizational, and societal change to pave the way for that technology.

With a change as substantial as blockchain technology, countless modern institutions would need to fall before blockchain could fully be implemented.

As the Harvard Business Review explains, “It would be a mistake to rush headlong into blockchain innovation without understanding how it is likely to take hold.”

The Technology Behind Blockchain

As we mentioned above, blockchain is a distributed, digital ledger. It’s a peer-to-peer network that lies over top of the internet.


One of the key features of this technology is that it’s a distributed database. It’s decentralized. The database exists in multiple copies across multiple computers. Each of these copies is identical. The computers – or nodes – all form a peer-to-per network, which means there’s no centralized database or server.

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