How does the block chain technology work?

Three principal technologies to combine the creation of a blockchain. These technologies are 1) private key cryptography, 2) a distributed network with a shared ledger and 3) an incentive to service the network’s transactions, record-keeping as well as security.

How these technologies work together in order to secure digital relationships?

Cryptographic keys

Two people are involved in the transaction over the internet. Each of them does hold a private key as well as a public key.

The main purpose of this component of blockchain technology is to be able to create a secure digital identity reference. Identity is also based on the possession of a combination of rather private as well as public cryptographic keys.

The combination of such keys can actually be seen as a dexterous based form of consent thus creating an extremely useful digital signature.

In turn, this digital signature does provide a strong control of ownership.


But strong control of ownership is not sufficient enough to be able to secure digital relationships. While the authentication is solved, it must also be combined with a means of approving transactions as well as permissions (authorization).

For blockchains, a distributed network is required.

A Distributed Network

The benefit, as well as the need for a distributed network, has to be well understood.

The value of the bitcoin blockchain is that it is a larger network where validators, such as the cameras in the analogy do reach a consensus that they do witness the same thing at the same given time. Instead of cameras, they do make use of mathematical verification.

In short, the size of the network is also important to secure the network.

Bitcoin blockchain’s rather most attractive qualities are its largely amassed so much computing power.

System of record

When one combines cryptographic keys with this particular network, then amazing and useful forms of digital interactions do emerge.


A block that contains a digital signature, timestamp, and relevant information is then broadcasted to all the nodes in the network.

Network servicing protocol

For open, public block chains, mining is involved. Mining is built off in a unique approach to an ancient question of economics the tragedy of the commons.

With blockchains, by offering one’s computer processing power to the service the network, there is indeed a reward available for one of the computers. A person’s self-interest is also being made use of in order to help serve the public need.

With bitcoin, the goal of the protocol is also to eliminate the possibility that the same bitcoin that is made use of in separate transactions at the same time, in such a way that this would indeed be difficult to detect.

This is how in fact bitcoin does seek to act as gold, as property. Bitcoins along with their base units need to be unique to be owned and also have value. To achieve this, the nodes to serve the network that creates as well as maintain a history of transactions for each of the bitcoin by rather working to solve “proof-of-work mathematical problems”.

The type, amount, as well as verification, can be different for each of the blockchain. It is a matter of the blockchain’s protocol or even rules for what is and is not a valid transaction or a valid creation of a new block. The process of verification can actually be tailored for each blockchain. Any of the needed rules and incentives can also be created when enough nodes to arrive at a consensus on how transactions ought to be verified.

Now the present trend is towards blockchain development whereby many such experiments are being run. The only conclusions drawn so far are we are yet to understand well the dexterity of the respective blockchain protocols.

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About the Author: Nagendra Gadamsetty

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