what is blockchain

What is a Blockchain and How Do They Work?

The term, “blockchain” has been used frequently across different industries in the last few years, and many still don’t know what it is or how it operates in their different applications. As it is with almost all technical programs, only the blockchain experts seem to know the intricacies of its operation, and the numerous technical terms one has to understand before getting what blockchain is doesn’t help.

A blockchain is a decentralized data storage system that is most popular for its role in cryptocurrencies such as bitcoin.

It stores information using blocks that can hold only a certain size of data but link to other blocks that contain a continuation of that data with a chain, hence the name.

This article will educate you on what a blockchain is. After reading, you’ll understand how blockchain works in the different industries it has found use.

An Overview of the Blockchain

Data stored on traditional databases can be susceptible to falsifications because they can be edited. However, distributing data among nodes of computers across a network makes it difficult to edit data on the database, and that is the idea behind the blockchain database system.

A blockchain is a database system that uses distributed ledger among computer nodes to store data in blocks, and links them – with chains – in chronological order, with time stamps, to discourage edits, and retain trust in the data.

Blockchain is used in many industries to store digital information that is considered to be of utmost importance. However, they are mostly associated with cryptocurrencies, especially bitcoin. This is because of the decentralization it offers, which bitcoin finds useful.

Data stored on a blockchain is irreversible, and each block is stored on different nodes in a computer network, increasing the trust the users of the system, and in the network, have in the information stored there.

Blockchain is arguably the most trusted database system in the world as of today.

How Blockchain Works

Bitcoin works using the Distributed Ledger Technology, DLT.

As the name implies, blockchain uses blocks and chains, in place of tables used in traditional database systems, to store data. The blocks contain a set amount of data, and each block is connected to another, in chronological order, by a chain.

When a transaction is done on a blockchain system, the details of the transaction are stored in a ledger. The ledger consists of blocks that contain all the data about the transaction. The bigger the data, the more blocks the ledger contains. These blocks are stored randomly among each computer that forms the network.

Once a transaction is initiated, it is processed through the network of peer-to-peer computers, scattered around the globe, that mathematically solve equations to confirm the authenticity of the transaction. Once confirmed, the transaction details are clustered in blocks, chained together in permanence, and accessible to all computers on the network.

Despite that the blocks are stored on different nodes, they are linked by a chain such that the first, second, third, and other blocks containing the transaction’s data, are linked in that order. Each block carries a timestamp of when it was created to facilitate the chain linking.

This means the data stored on a blockchain system cannot be altered or deleted, at least not without the consent of all the other nodes in the network.

Different types of data are stored on a blockchain system, other than transactions. Such data include legal contracts, smart contracts, state-owned information, an organization’s product inventory, and many more.

Benefits of Blockchain

Due to the nature of blockchain, it offers some benefits over traditional data storage options. These benefits include:


Customers’ data are usually stored in a central location, for accessibility, before the creation of the blockchain system. However, there’s a common problem with the centralized system, a single point of failure.

All stored data can be easily compromised in their location by an actor. Accidents and planned attacks will probably erase data successfully.

However, with blockchain, data is replicated and stored on the different nodes of the network. Therefore, failure of a node, or attack on or more nodes doesn’t compromise the data or lose it.


Blockchain is an open-source system, where every member of the network can see what’s going on with stored data, and they’re involved in the confirmation of every transaction.

If a transaction detail, a customer’s information, or state-owned information is to be updated, it requires the approval of every node in the network for it to happen.

Also, in an event that a cryptocurrency on the blockchain system is stolen, it can be traced, although the hacker may remain anonymous.


One of the reasons many industries have begun to adopt the blockchain system is because it offers their data better security than the previously available database systems. Data stored on the blockchain system is considered safe from compromise and unauthorized edits.

Also, users of the blockchain system, that is nodes in the network, are anonymous, protecting the identities of individuals behind them.

Applications of Blockchain

As the benefits of blockchain are apparent, many industries have adopted them and applied them in different ways. From the financial industry, where blockchain is most used, to the entertainment, arts, and security sectors of the economy, blockchain has seen its use increase.

The application of blockchain include:


Cryptocurrencies are probably the most common application of the blockchain system. They offer a decentralized currency that currently stands with the fiat currency in serving as a means of commodity exchange and transaction fulfillment.

Cryptocurrencies, such as bitcoin, have become legal tender in some countries, and their use continues to increase daily.

Decentralized Financial Applications (DeFi)

Financial applications that discourage the involvement of third parties in the completion of a transaction have sprung into existence in the last few years.

Now, people can transact directly with exchanges without the interference of banks. Many of these Defi apps are also free to use.

Non-fungible tokens (NFT)

A relatively new development in the blockchain system is the creation of digital arts, known as NFTs.

NFTs are an expression of art in a digital form. Although ownership can be transferred from one person to another through a smart contract, made available by blockchain, the creator is always the same.

Final Thoughts

Blockchain is a database system that uses blocks and chains to store data in a secured network system consisting of peer-to-peer computers scattered around the world. It offers better security, eliminates the single point of failure problem, and promotes transparency.