November 17, 2021

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How does a blockchain work – Simply Explained

blockchain capital

blockchain capital

Blockchain Technology

Block chain technology is a structure that stores transactional records which called as block of public in several databases , known as “ chain “ in a network connected through peer to peer nodes and this storage is referred to as “distributed ledger technology ” (DLT) . which make the history of any digital assets unalterable and transparent through the use of decentralization and cryptographic hashing .

 Every transaction in this ledger is authorized by digital signature of the owner . Which authenticate the transaction and safe guard it from tampering .

Why learn Blockchain

Block chain is powerful technology with application  in field of crypto currency ,Government , insurance , for identification , supply chain  in data management and many more . By discovering it more about it’s fundamental mechanism you can find various ways to solve modern modern problem in several ways .


The decentralized Blockchain system can influence our day to day life in a very large-scale . as we know it’s a very new technology came in the market in just few years ago But it have very large scope in the future market point of view cause of it’s problem solving capability , And it solving our complex problems right from proving out digital to the way of business function . Financial institution , entertainment industry , Blockchain applications , legal institution , hospitals , government are present in every sector . While some industries have embraced this technology blockchain technology .

Here are some list of application which uses block chain technology and we use them in our day to day life but aren’t aware of it .

  • Cryptocurrency
  • Smart contracts
  • Streamlining supply chain management
  • Media and entertainment
  • Insurance industry
  • Record management
  • Improving governance

Why do we need Blockchain ?

  1. Increase in digital processing power
  2. Rapid growth in cyber crime
  3. Rise of bitcoin and cryptocurrency
  4. Helpful in improving current banking security system

Blockchain requires high processing power than normal data computing . it’s all because of redundancy of data , cryptography and distributed storage . But today, computer processing has much more processing power thanks to current generation modern processors .

History of blockchain

  1. Blockchain was invented by a person (or a group of people ) name called satoshi nakamoto in 2008 to serve the public transaction ledger of the cryptocurrency Bitcon . Due to which bitcoin became the first digital currency which  was independent on the server cause here transactions are done in decentralized manner .

    Nakamoto improved the design in an important way using hash-cat like method to timestampt block without requiring them to be signed by trusted and introducing a difficulty parameter to stabilize rate with which blocks are added to chain .

    Means if the server crashesh then there will be no loss of any type of user data cause all the information is already stored in millions of computer at the same time and only those person who is the part of this chain can only access the ledger but can’t decrypt it . And that becomes the Plus point of technology behind bitcoin cyrptocurrency .

    In august 2014 . the bitcoin chain file size containing records of all the transactions that is been present on the network reached to 20GB . In 2015 reached to 30Gb , in from 2016-17 bitcon Blockchain grew from 550Gb to 100GB  in size and the ledger size had exceeded 20Gb by early 2020.

Why Blockchain become popular

  1. Suppose you are transferring money to your family or friends from your bank account . Either you can do it by using a sleep or by using net banking and you get a slip of transaction right ?. And when the transaction is done your bank updates the transaction record seems so simple enough .

    It’s seems so quite , easy and very convenient way of transferring money but what if there is huge capital to send from one country to another from your bank account . then here will be the problem , the banks which acts as a mediator in between you and your buddy to whom the money has to be sent charges a huge amout of transaction charge which I think no one won’t give that and which also take 2-3 days for completetion of transaction sometime .

     To solve this issue blockchain technology came in to existence and  which also take very low transaction fee nearly 0.5-0.2% as compared to actual amount transferred and the most important factor is that you can send your money in just one click all over the world . So this became the major point of Blockchain technology . and the various features of Blockchain technology is given below .

    Most people assume Blockchain and bitcoin can be used interchangeably , but in reality that’s not the actual cause . Blockchain is a technology capable of supporting various application related to multiple industries like finance , supply chain , manufacturing etc.. But bitcoin is a currency that relies on Blockchain technology to be secure also there is lots of cryptocurrencies are available in the market in current situation but on that time bitcoin was the first cryptocurrency newely developed by using Blockchain technology.

    • Highly secured
    • Decentralized System
    • Automation capability

How does blockchain work?

  1. Block chain is a list of records called blocks which stores data publicly in chronological order and all the information of the transaction in it is encrypted by the cryptography to insure that the privacy of the user is not compromised and data can’t be altered.

    Blockchain consist of three important terms i.e. block nodes and miners .


    Every chain consist of multiple blocks and each block has three basic elements

    • data in the block
    • A 32 bit whole number called nonce. Nonce is randomly generated when a bloc is created which generates block header hash .
    • The hash is 256 number to the nonce. It must start with the huge number of zero .


    one of the most important concept of blockchain technology is decentralization . No one computer or any other organization can own the chain . instead , it is distributed ledger via nodes connected to the chain .Nodes can be any kind of electronic device that maintains copy of Blockchain and keeps the network functioning .


    Miners basically is a process of adding transaction to the public ledger  which will be publically available to all the member who is system of this Blockchain . it simply means that every single user of this Blockchain network system can access this ledger .

    And this process is basically done by a software which requires high computability power to solve the incredibly complex maths problem of finding nonce that generates an accepted hash . Because the nonce is only of 32 bit and hash is 256 . There are roughly four billion possible nonce- hash combinations that must be mined before the right one is found. And whenever it occurred their block is added to the chain at that instance .


  1. Here two indivisual wish to perform transaction using private key and public key .first person would attach all the information about the transaction on to the public key of second party . And this whole information is gathered in to block.

    And each and every block in a network contains a unique digital signature . timestamp and other important relevant information . and it should be noted that and this block is transmitted to across all of the network’s nodes and when the right indivisual uses his private key and matches it with the block then the transcation get completed successfully.

blockchain capital

Some important points regarding transaction :

    • Blockchain is a type of spreadsheet containing information about transaction
    • Each transaction generates a hash
    • A hash is a string of numbers and letters
    • Transaction are entered in the order in which they occurred . Order is very important
    • Hash depends not only on the transaction but the previous transaction’s also .
    • Even a small change in transaction creates a new hash .
    • The nodes check to make sure transaction has not been changed by inspecting the hash .
    • If a transaction is approved by majority of nodes then it is written in to a block .
    • Each block refers to a previous block and together make the Blockchain .
    • A Blockchain is effective as it is spread over many computer, each of which have a copy of blockchain .
    • These computer are called nodes.
    • These blocks updates himself in every 10 minutes .

Types of Blockchain s

    • Currently there are four Blockchain networks

      1. Public Blockchain
      2. Private Blockchain
      3. Hybrid Blockchain
      4. Sidechain 


      1. Public Blockchain :

      Public Blockchain is a open network anyone can download the protocols and read all the instruction i.e. transactions , read , write and can participate in the network . it’s decentralized and all the transaction are recorded in a block , each block is linked to each other to form the chain system .

      1. Private Blockchain (Invitation only network):

      Private Blockchain system is permission . One can only join the network if network administrator of the chain system doesn’t give the permission to it.Means participants and validator access is restricted .

      There can be different level of access and information that can be encrypted to protect commercial confidentiality .After getting to permission to join the network user have permission to read write and audit the Blockchain .

      1. Hybrid Blockchain

      Hybrid network is combination of both the network , private and public Blockchain network .The exact working of chain can vary based on which portion of centralization , decentralization are used . And this gives the organization better control on what they want to achieve .rather than changing their plans on limitations of the technology .

      1. sidechain

      Sidechain are emerging mechanism that allows tokens and other from one Blockchain to be securily used in separate Blockchain and then be moved back to original Blockchain if needed.sidechain functionally holds tremendous potential to enhance the capability of existing Blockchain .


    • Cryptocurrency broadly defined , is virtual or digital money which takes the form of token or “coins” while some cryptocurrencies have ventured in to the physical world with credit card or some other projects   .

      The crypto in cryptocurrencies refers to complicated cryptography which allows for the creation and processing of digital currencies in decentralized manner . which uses Blockchain system as we have discussed the working principle above. 

      Cryptocurrency are almost designed to be free from government manipulation and control .  apart from this there are also lots of cryptocurrencies available in the market but most of the people don’t know these, some of them is mentioned below .

      • Ethereum(ETH)
      • Ripple(XRP)
      • Litcoin(LTC)
      • Tether(USDT)
      • Bitcoin cash (BCH)
      • Libra(LIBRA)
      • Monero (XMR)
      • EOS(EOS)
      • Bitcoin SV(BSV)
      • Binance coin (BNB)

Why Bitcoin

Well as you all know that bitcoin is a digital currency it doesn’t have physical existence in our real world but but still it has become center of attraction for investor cause of it’s high demand in currency market which effectily helps to increase their saving but the most important factor is that there is no any intermediate between you and bitcoin transaction if anything goes wrong then . Only you’ll be responsible for your decision even government can’t helps to return your invested money actually investing in these type of currency we can simply called it as bit .

I have given you very small introduction about bitcoin cause technology used behind bitcoin is Blockchain . Although there are also lots of cryptocurrencies available in the market but this was the most popular and first cryptocurrency newely discovered on that time . Most of the people have misconception that blockchain and bitcoins are equaivalent to each other.

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