Blockchain explained: What it is & how it works

Blockchain has become one of the most influential technologies of the digital era, powering cryptocurrencies like Bitcoin and Ethereum while transforming industries such as finance, healthcare, and supply chain management. Despite its complexity, blockchain is simply a secure, transparent, and decentralized way to store and verify information.

This article breaks down what blockchain is, how it works, and why it matters—in a way that’s easy to grasp, yet professional and insightful.

What is Blockchain?

At its core, blockchain is a distributed digital ledger that records transactions across multiple computers. Instead of relying on a single central authority (like a bank), blockchain operates on a peer-to-peer network, ensuring security, transparency, and immutability.

Key Features of Blockchain:

✔ Decentralization – No single entity controls the system.
✔ Security – Transactions are encrypted and tamper-proof.
✔ Transparency – Transactions are visible and verifiable by all participants.
✔ Immutability – Once recorded, data cannot be altered or deleted.

Think of it as a digital version of a shared spreadsheet, but one that is unhackable and automatically updates for everyone.

How does Blockchain work?

Step 1: A transaction is initiated

A transaction is created—this could be a financial transfer, a contract execution, or the recording of data.

Example: Alice sends 1 Bitcoin to Bob.

Step 2: Transaction verification

Instead of a bank verifying Alice’s balance, a network of computers (nodes) checks whether the transaction is valid. These nodes use cryptographic algorithms to ensure authenticity.

Step 3: Transaction is added to a block

Once verified, the transaction is grouped with others into a "block".

• A Bitcoin block contains about 2,000 transactions and is added every 10 minutes.
• Ethereum processes over 1 million transactions per day.

Step 4: Block is sealed & linked to the chain

Once full, the block is sealed using cryptographic hashing and added to the previous block—creating a continuous, unbreakable chain of records.

Each new block strengthens the security of the entire system, making hacking virtually impossible.

Why is Blockchain so important?

1. Financial Sector & banking

Cuts transaction costs and speeds up payments.
Reduces fraud—global banking fraud costs over $40 billion annually.
JPMorgan, Visa, and PayPal are integrating blockchain for faster settlements.

2. Supply chain & logistics

Tracks goods from production to delivery with full transparency.
IBM and Walmart use blockchain to monitor food safety, reducing contamination risks.

3. Healthcare & medical Records

Protects patient data from cyber threats.
Prevents counterfeit medicines—10% of all drugs worldwide are fake.

4. Digital assets & NFTs

Enables ownership of unique digital assets (NFTs).

Blockchain in numbers

Global spending on blockchain technology: Expected to reach $19 billion by 2024.
Bitcoin network processing power: Over 400 exahashes per second—stronger than the world’s top 500 supercomputers combined.
Ethereum transactions per second (TPS): Around 30 TPS, with planned upgrades aiming for 100,000 TPS.
Cost savings for banks using blockchain: Estimated at $27 billion annually.

Blockchain is revolutionizing industries by providing security, efficiency, and transparency without relying on intermediaries. Its impact extends far beyond cryptocurrency, from streamlining finance to securing medical records.

As the technology evolves, industries worldwide are exploring new applications, making blockchain one of the most disruptive innovations of the 21st century.

Will blockchain reshape the future of digital transactions and trust? It already is.