The critical purpose of Blockchain technology is to ensure a seamless yet secure data transaction across a network. Unlike any other preceded data archiving and transferring techniques, Blockchain offers a time-stamped stack of datasets. Though Blockchain is framed out for flawless digital currency transactions, it is the technology of this age with multifarious business advantages.

However, let’s see, what is Blockchain technology and how does it works

What is Blockchain Technology?

Blockchain is the brainchild of a person who wishes to get known by the name Satoshi Nakamoto. To explain Blockchain technology in the common terms, it is a chain of blocks lining up one after another. However, instead of any tangible material, it constitutes of time-stamped digital information. Each block seems more like a packet of data with a unique address. 

In technical terms, Blockchain is the chain of digital blocks in which each block is built of datasets and archives and validated in a peer-to-peer network. As a digital ledger, Blockchain information is stored in the blocks, which acts as a database. In contrast, a database cannot be defined as a Blockchain. 

Unlike the functioning of a centralized network, Blockchain works on a decentralized distributed ledger (registry) network. Each dataset (block) lines up chronologically to form a chain of allocated blocks in a network system. 

The whole process of Blockchain technology is composed of the balanced operation of Hash and Nonce functions (Cryptography), Nodes (peer-to-peer network devices), and Mining (Validation/Common Consensus).

Further, it can be defined as a chain of hash-linked data sets that are distributed to the peer network but incorruptible. It is a decentralized data structure at the same time a distributed ledger that records data. The data sets in a Blockchain are accountable and transparent to anyone in the peer network but encrypted to alter.

Today, Blockchain enables digital data to be distributed with transparency and security for diverse business sectors. Though the design propensity of Blockchain technology is more towards the fair transactions of crypto-currency, it overturned the security concepts of record-keeping and data transfer practices across every sector. 

How Blockchain architecture differs from Client-Server Architecture?

Client-Server Architecture

In a client-server architecture, systems are embedded directly with the server. The best example to illustrate this is ‘product search on eCommerce websites.’ When users search anything via a search engine, it processes the request from the server and sends back the relevant results to the user. The link appears here is more direct and doesn’t cross anywhere at all.

Though all the systems/nodes depend on a master server, any snag across the central system affects the whole network. Plus, every system synchronizes with the server clock. The elasticity of such architecture is limited to a limited length, yet scaling up is possible only in the vertical dimension. Further, the limited open ports bottlenecks at the peak hours and are more prone to Denial-of-Service attacks.

Blockchain Architecture

Blockchain functions under a decentralized network system. In a decentralized network, the connected systems/nodes are autonomous to make decisions that constitute the final agreement. For instance, the end-to-end exchange of Bitcoins is performed over such a decentralized network system. The nodes joining a network can exchange cryptocurrency anonymously with a public address and value.

Unlike a centralized network, Blockchain architecture is independent, and instead of abiding by a global clock environment every node has its time environment. Moreover, it has several central points that make it less vulnerable to central server failures, which can lead to an entire network shutdown. 

In contrast to other network systems, decentralized network systems/nodes are more scalable. Every node act as a peer to other nodes and so no supremacy for any systems is possible. Hence, each node is free to add additional components to scale-up efficiency and to become highly available.

Key components of Blockchain architecture:

Block: It is a box of data that is immutable and secured by cryptographic hashing. It can be related to a page of a ledger that is possible cannot alter. A block in a Blockchain comprises of the hash of the previous block, proof of work, timestamp, transaction summary. Each adding block possesses parts of the data of the preceded block. As each block is filled it makes way for a new block, and the chain grows by.

Mining: Mining is the process of determining the validity of the block. It involves a lot of mathematical probabilities to validate a transaction. This mining process is performed by the miners and each validated transaction is recorded on the ledger every 10 minutes. It is the very mechanism that helps Blockchain to be secure with its decentralized network architecture. 

Proof of Work: Proof of Work is an essential factor in adding a block to the chain. It is more of an algorithm that the miners use to resolve the problem to validate the block. A lot of trial and error makes it a random process. The miners who resolve the puzzle first by completing the proof of work get rewarded with crypto. The primary purpose of their protocol is to prevent DDoS attacks. Also, proof of work helps to bypass the trust over the third-party.             

Distributed Ledger: It is a share and synchronized database across a network. Also, it is a transparent record book that every node can access and have a copy of it. Further, it helps to reduce the risk of manual or computational manipulation at any of the points. Any changes across the network would be visible to the nodes and thus leads to better security. 

Hash and Nonce: A hash is a cryptographic function that encrypts the input data into a unique digital signature. Each unique block would get an exclusive data structure and helps to index and retrieve datasets from the database. In addition, Nonce is a number added to the hash(encrypted) block. It is a cryptographic random token used to achieve more security. It is number set added to the hash which is used only once in the authentication process to prevent replay attacks. 

Nodes: Nodes are important components of a Blockchain infrastructure. In a Blockchain network, the assortment of such nodes makes the distribution of digital data across a peer-to-peer network. Any computer which can serve as a communication point and exchange transaction information considered as a node. Further, based on the function it serves, nodes can be classified as Full node, Supernode, and Miner node.

Smart Contract: It is an unchangeable digital agreement. It serves as an assuring agent to transact data/money between the sender and receiver.  To illustrate, if anyone wants to invest in a startup budding-up in another country, a smart contract helps to build the native trust factor between the two entities. It comprises a set of rules which the proposed parties agree to abide by. Thus, when the agreed conditions are met, the beneficiary can access the value/data.

Fork, Softfork, and Hardfork: When a change/modification occurs in blockchain protocol by creating two blocks to form an alternative chain at different points of a chain, it is known as forking. Possibly, there are two types of forking i.e, hard forking and soft forking. Hard forking refers to the code modification that makes previously valid blocks invalid. Likewise, Softfork is the process of change in the protocol where previously valid blocks are recognized as invalid by the nodes.

Block Rewards: If a miner successfully mines and validates by the network a new bitcoin will be awarded to the miner. For example, while X sends an amount to Y, the transaction information stored in a block, and it would be around 1MB in size. On finding every new block, the miner gets rewarded for their effort. This is called a block reward.

Cryptography: Cryptography is the very link that connects the blocks securely and sequentially. Cryptography provides a unique identity to each block in the chain and ensures a secure transaction. Thre are types of cryptography, namely hash-function, Public-key, and Secret Key.

Address: An address in a blockchain network is a lengthy string of alphanumeric characters. It is used to exchange cryptocurrencies across the network. 

Proof of Authority: Proof of Authority is a consensus algorithm functions in a pre-authenticated network of nodes. It renders a high transaction rate and, as a result, spikes the pace of validation of blocks.

How Does Blockchain work?      

To understand the complex functions of Blockchain, it is necessary to understand the key ingredients which constitute a Block and how it lines up sequentially and establish an immutable network of data blocks. The inevitable technology components that make Blockchain technology exceptional and secure is cryptography, distributed network architecture, and the process of consensus. The way blockchain validates transactions with its decentralized network architecture is what entranced more audiences to this technology. 

The whole process starts with a digital block. A block composed of specific datasets, the hash of the previous block, and the same block. The dataset would differ based on the scenario with which the network is established. Each data transaction happens in a network generates a hash (a string of number and letters), and these transactions are entered in its chronological order. Except for the genesis block (First block in a Blockchain), all additional blocks rely on parts of the previous blocks. Moreover, each hash is sensitive to the minute changes in the transaction. 

As an open ledger, it is managed by a peer-to-peer network structure. Every node in the network works on the entangled mathematical problems simultaneously to verify the validity of transactions. Once the transaction gets validated and recorded as a new block it can’t be altered easily. To make a change in a block requires the alteration across all the subsequent blocks. This makes Blockchain an invulnerable technology. 


The applications of Blockchain technology are diversified in this tech-appropriate age. Today, many entities are finding secure operational groud by implementing Blockchain technology such as derivatives in Stock exchanges, smart contracts in business transactions- including insurance companies, and as a tool for identity verification, etc. Thus, more exciting features of this technology would be visible across the different scenarios of common people shortly.