How does blockchain work?

Centered oHow does blockchain work? Blockchain is a distributed ledger technology (DLT) that enables data to be stored globally on thousands of servers and it’s centered on a peer-to-peer (P2P) topology. A blockchain collects information clustered in groups, known as blocks. The three main concepts of blockchain are blocks, nodes and miners.


A block contains information about its past and future. Every time a block is completed, it turns into a permanent record of transactions and becomes part of the past. It then makes way for a new block that will hold records of new transactions. In time that block will be completed too, and thus form a blockchain. The data stored in a block is unalterable. 

Bitcoin is the first and best known blockchain. Bitcoin is considered to be the original cryptocurrency and is by far the biggest one worldwide. There are, however, so many different blockchains out there these days. Blockchain can be public, private, consortium and hybrid, as well as permissioned or permissionless.


Decentralization is a key principle of blockchain technology. No single computer or entity may own the chain. Instead, the ledger is distributed via the nodes attached to the chain. Nodes can be any form of electronic device that preserves copies of the blockchain and keeps the network running. Each node has its own copy of the blockchain, and the network must algorithmically authorize every newly mined block for the chain to be modified, trusted, and checked.

Nodes are divided into two categories; full nodes and lightweight nodes. Full nodes enforce all the bitcoin (network) rules entirely. They form the backbone of the network. Lightweight nodes don’t hold the complete history of the blockchain but are a lot easier to use.


Miners are producing new blocks on the chain through a method called mining. In a blockchain every block has its own unique nonce and hash, but it also refers to the hash of the previous block in the chain, so it’s not easy to mine a block, particularly on large chains. Miners use special tools to solve the extremely complex math problem of finding a nonce that generates an accepted hash.

Simply put, (bitcoin) mining is the process of creating new bitcoin by solving a computational puzzle. Miners need heavy equipment and very sophisticated computers in order to start the entire process. Even then it is a slow and extremely time consuming operation. Ultimately, mining can be rewarding, but definitely isn’t so for everyone.

Blockchain needs miners

Miners use extremely powerful computers to solve complex math problems. When these problems are successfully solved, a block will be added to the blockchain. The miner who solves the problem mines a block and will be awarded in bitcoin. This forms the basis of (bitcoin) mining and helps keep the network safe and trustworthy. The network is built on a peer-to-peer network, meaning that every single miner across the globe is contributing their computing power to maintain the network, confirm its transactions, and keep them secure. Every four years a ‘halving’ of the rewards occurs, meaning that mining will become less favourable every four years. The profitability of mining ultimately depends on the bitcoin price.

Examples of Blockchain usage

Blockchain usage and applications extend far beyond bitcoin and cryptocurrency. Blockchain is transparent and fair as well as time and money saving. There are plenty of applications that are really popular.

One of those applications is smart contracts. Smart contracts eliminate the need for a middleman, that is being used for traditional contracts. It also adds more accountability to all parties involved. Contracts enforced on a blockchain are becoming more and more populair. Sectors like healthcare, real estate and government are starting to see the benefits.

NFTs (non-fungible tokens) are another popular application within the blockchain industry. They might very well be the hottest thing at this very moment. Since 2021 we have seen an extreme rise in interest in those tokens. NFTs are digital items like art, music, memes or videos. They are sold on blockchain and because of blockchain technology buyers can claim sole ownership. Because of this the digital item holds value and becomes desirable. 

Be part of blockchain

Blockchain is a very exciting and fast-growing technology and industry. There is a seemingly infinite amount of cryptocurrencies, each with their own specific applications, all of which is possible because of blockchain technology. Blockchain allows for digital information to be recorded and distributed, whilst being unalterable. 
Are you excited to be part of this fascinating industry as well? If so, have a look at our blockchain developer jobs or cryptocurrency jobs for instance. A large variety of job vacancies can be found on the Blockchain4Talent website. If you really want to be part of the future, chances are you will find your perfect start here.

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