Blockchain and how it works

Blockchain Overview:

Blockchain has proven to be an undeniably fascinating electronic ledger. It helps ensure that processes, procedures, interactions, governance, and currency are streamlined without an intermediary (middleman or agent). Despite the ingeniousness of this invention, it is still relatively unknown to the average person around the globe.

This blog post is for a general audience; therefore, it does not require prior knowledge.

Firstly, it is essential to understand the basic concepts upon which Blockchain is built as this will subsequently broaden our knowledge of how it functions.

After grasping and understanding the concepts mentioned in this blog, you will be able to understand these blogs about cryptocurrencies and smart contracts.


Hashing Function:

A hashing function is a mathematical function that takes in any random text and generates a fixed-length text. Think of it as a box in which one can put any size document(s), and it will produce a unique token with a fixed length.

Message: “My name is XYZ, and I would like to transfer $100 to my friend ABC.”

Output = Hash(Message)


It’s important to note that the Hash function’s output will be uttered entirely if the message is changed completely or slightly. Hash functions are irreversible; given the output, the original message will never be found.


The word “cryptography” originates from Greek, meaning “Secret Writing”. Cryptography is a science of protecting data against tampering, eavesdropping, unauthorized access, and malicious use. Through cryptographic algorithms, once the information is locked (encrypted), it is nearly impossible to unlock (decrypt) that information without the knowledge of a secret key. However, using the most advanced computing power cannot guarantee such a decrypting process.

Cryptographic algorithms are reversible, unlike the Hash functions. So the message locked using the secret key can be unlocked to retrieve the original message.


Public Key Cryptography:

Public Key Cryptography is a technique in which two keys are used to encrypt relevant information or data. One of the keys, called “Public Key,” is used to lock vital information and is publicly available to users. This is similar to an individual’s bank account number, which can be shared with others if desired. The second key, the “Private or Secret Key,” is used to unlock vital information. This key is similar to the PIN of a debit card or the signature on a check. The public/private key pair is analogous to a lock. For example, anyone can put a lock on a box, but once locked, no one can unlock it unless the private key is available.

Public Key: XSDGD1SDF34AD

Private Key: GF34GREHS54AS

It is the user’s responsibility to keep their private key safe from anyone else. If the key is compromised, it can be used for malicious purposes by hackers or criminals. Just like if someone can retrieve the PIN of another individual, they will automatically possess the power to do away with the victim’s finances once such an opportunity presents itself.


Digital Signature:

We can create digital signatures using a combination of Hash Function and Public Key Cryptography. Consider using a document with text.

Message = “I would like to pay $10 to XYZ.”

We then hash it to get a unique token.

Hash = A1B2C3

Then, we sign this hash with our private key.

Signature = Sign (Hash, Privatekey)

This will give us a signature value that anyone can verify using the public key.

Verify (Message, Signature, PublicKey)

This will output “Verified” if the message is the same as what was signed. If it is not the same, then it will fail verification.

Centralized Systems:

Centralized computing systems are owned and controlled by organizations like Google, Amazon, Facebook, Banks, Governments, and more. Users can interact with these systems over the internet; whatever data they provide is then stored in the central databases. These organizations have complete control of the data and can use them as they please. Furthermore, each organization enforces its rules for using its system.

Decentralized Systems:

Decentralized systems are formed by a computer network in which no central authority exists. Anyone can join and leave the network and access the information as they please. The users, not the organizations, control the data on the decentralized networks, which is more like a democratic system, where users are in control.


A favorite question among people who have just begun familiarizing themselves with this new technology is: Why is it called “blockchain”? This stems from the concept that, within blockchain technology, blocks of information are connected using the hash value of the data inside the block. 

The Blockchain is exceptionally secure because even the most minor change in any block can alter the value of the original hash, ultimately breaking the chain. This means that any malicious attempt to corrupt data can be easily detected and will be rejected by other computers in the network.


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