Blockchain Explained: What It Is, How It Works and Uses

Knowing how blockchain works and its features is already a must. So you don’t miss out, we developed an article that explains blockchain from the root.


What is blockchain technology?

Blockchain is a distributed digital ledger that stores any type of information. It can be applied to all types of transactions, which can be tangible (a house, a car, cash money) or intangible (patents, copyrights, brands, cryptocurrencies).

Although any conventional database can store this type of information, blockchain is different because it is totally decentralized.

What does this mean? That the database is not in one single location, maintained by a centralized administrator like a bank, a government or a company; but it is constituted by many identical copies located in different computers distributed in the network.

These individual users (called nodes) are the ones who validate all the transactions that are made. This is how blockchain decentralizes management by eliminating all intermediaries.

Do you see now why they say this technology is disruptive? Let’s go a bit further and see how it is applied in the real world.

How does blockchain work?

As we have said, digital information is recorded on the blockchain and distributed in a decentralized way. To do this, the users that make up the network must approve that this distribution is done properly.

Let’s take a practical example of how a blockchain transaction is carried out.

  1. Initiate a new transaction.
  2. The transaction is transmitted to a network of computers (nodes) peer-to-peer distributed around the world.
  3. Computers approve that the transaction is valid through the use of cryptographic keys.
  4. Once the transaction is legitimized, it is grouped as a block.
  5. This block is added to the block chain (blockchain).
  6. The transaction is completed.

Why is blockchain important?

The technological environment provided by blockchain is important because it comes to democratize access and use of this information.

How is this? The decentralized character of the blockchain makes it so that no one is the owner of the data, but instead the power is divided among all the users that operate on the network.

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The management of the data is not only shared, but its transfer must be approved by all these authorized members. This is how the administration of the information becomes a transparent and reliable process, while generating multiple opportunities and applications in the real world.

Main Features of Blockchain

Let’s take a look at the attributes that make this technology unique.

  • Decentralization
  • Data accuracy
  • Secure transactions
  • Cost reduction
  • Fast transactions


Blockchain does not store information in a single location, but is instead copied and distributed across a network of computers.

Whenever a new block is added to the blockchain, each computer on the network updates its blockchain to reflect the change. This makes the information harder to manipulate, as it will be replicated in multiple locations.

Data Accuracy

All transactions on the blockchain are validated by a network of computers. This process eliminates almost any human involvement in the verification process.

In this way, human errors are minimized and an accurate record of the information is obtained.

Secure Transactions

When making a transaction, the blockchain user network must verify its legitimacy. Once consensus is reached, the block is added to the blockchain and the transactions are recorded in the distributed ledger, forming a secure digital chain from the start.

Cost reduction

Transactions do not need any kind of intermediaries (managers, lawyers or banks), so once intermediaries and third party verification are eliminated, their associated costs are also removed.

Fast transactions

It is no longer necessary to wait for the Bank to approve a transaction in its business hours, or to credit the funds in a certain time, and this is because the blockchain is operational 24 hours a day.

Types of Blockchain Networks

There are four ways to build a blockchain.

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Public Blockchain Networks

These are open source networks where anyone is free to join the network and can view, participate, and even validate transactions. It has no restrictions or permissions.

The most popular are the chains where cryptocurrencies such as Bitcoin and Ethereum originated.

Private Blockchain Networks

These are blockchains that only admit previously invited participants to the network.

Although they are decentralized like public networks, in this case there is an organization that governs the network and controls who can participate and perform some type of transaction.

Hybrid Networks

Here elements of public and private blockchain are combined, allowing organizations to configure a permissioned private system along with a permissionless public system.

Organizations can control access to data stored on the blockchain and decide which data is public.

Consortium Blockchain

This is a private network, where participants are chosen by a consortium. These networks are added to improve security, transparency, and traceability.

Consortium networks

It is when multiple organizations share the responsibility of keeping the blockchain decentralized. These preselected organizations determine who can send transactions or access the data.

Examples of uses and applications of blockchain

Blockchains are used for different purposes and its application goes much further than economic and financial.

Let’s take a look at the advantages of using this technology:

  • Cloud storage: Information is stored in nodes located in different geographical points, resisting the fall of any server and avoiding data loss.
  • Data registry: The data verification process is decentralized; thus avoiding possible hacks by setting up a safer registration method.
  • Smart contracts: Contractual relationships between people or machines are automated without the need for the parties to intervene, making the process agile and transparent.

We have already seen that the versatility of blockchain technology is enormous and its applications are infinite. Now tell us, have you already started taking your first steps in blockchain?