How Blockchain Works: A Deep Dive into the Process

Tuesday, October 4, 2022

Exploring the Inner Workings of Blockchain Technology for Small Business Owners

In our previous posts, we equipped you with a glossary of essential terms and introduced the key components of blockchain. Now that you have a strong foundation, it's time to take a closer look at the inner workings of blockchain and understand the process that makes it so powerful and secure.

In this post, we're going to make it easy for you to understand how data is added to a blockchain, and we'll explore the key concepts of Immutability and Transparency. By breaking down these important elements, you'll get a clear picture of how blockchain technology works, and you'll be able to see just how it can revolutionize your small business.

So, let's continue our exciting journey together and uncover the secrets of blockchain's inner workings. With this deeper understanding, you'll be well-prepared to harness the power of blockchain technology and leverage its benefits for a successful, secure, and innovative future for your small business!

The Process of Adding Data to a Blockchain

Adding data to a blockchain involves a series of steps that ensure the security and integrity of the information being added. Here's a brief overview of the process:

Initiating a Transaction

A user starts the process by initiating a transaction, such as transferring cryptocurrency to another user, registering a digital asset, or executing a smart contract. The transaction details include information about the sender, recipient, and the transaction itself.

Broadcasting the Transaction

Once the transaction is created and digitally signed, it's broadcasted to the entire network of nodes (computers) participating in the blockchain.

Verifying the Transaction

Miners or validators, depending on the consensus mechanism used, are responsible for verifying the transaction. They check the digital signatures, ensure the sender has the necessary funds or permissions, and validate the transaction against the rules of the blockchain protocol.

Creating a New Block

When a miner or validator verifies a set of transactions, they bundle them together into a new block. They also include the previous block's hash, creating a strong link between the blocks. The new block is then added to their version of the blockchain.

Reaching Consensus

To add the new block to the blockchain, the miner or validator must obtain consensus from the majority of the network. Different consensus mechanisms have different rules for achieving consensus. For example, in Proof of Work, miners compete to solve a complex mathematical puzzle, while in Proof of Stake, validators are chosen based on the number of tokens they hold and are willing to "stake."

Adding the Block to the Blockchain

Once consensus is reached, the new block is added to the blockchain, and the updated ledger is shared with all the nodes in the network. The transaction is now considered confirmed, and the data within the block is considered immutable.

Immutability and Transparency

Immutability and transparency are two key features of blockchain technology that make it safe and reliable to use.


Immutability means that once data is added to the blockchain, it cannot be changed or tampered with. This is like writing a sentence in permanent ink – once it's written, you can't erase or modify it. In a blockchain, this feature is achieved through complex mathematical algorithms that link and secure each block of data to the previous one. As a result, any attempt to alter data would require changing all the blocks that came after it, which is practically impossible due to the network's decentralized nature.


Transparency means that all the information stored on the blockchain is visible to anyone who wants to see it. Think of it like a public bulletin board – anyone can walk up and read the information posted there. In a blockchain, each participant has a copy of the entire ledger, allowing everyone to access and verify the data. This level of openness ensures that no single participant can manipulate the information without others noticing, thereby promoting trust and accountability in the system.

Together, immutability and transparency make blockchain technology secure and trustworthy, as users can be confident that the data stored on the blockchain is accurate, unaltered, and visible for everyone to verify.

Wrapping Up

Well done on taking a deep dive into the process of adding data to a blockchain and understanding the importance of Immutability and Transparency! This knowledge gives you a comprehensive perspective on the inner workings of blockchain technology and how these essential features contribute to its security, trustworthiness, and efficiency. As a small business owner, you're now better equipped to leverage the power of blockchain to drive innovation and growth in your business.

With a solid grasp of how blockchain works, it's time to explore the different types of blockchain networks and how they cater to various needs and applications. In our next blog post, we'll delve into the world of Public & Private Blockchains. By understanding the distinctions between these two types of networks, you'll be able to identify which one best suits the unique requirements of your small business.

Stay tuned for our upcoming post, and let's continue our journey into the world of blockchain technology together. As we uncover the various facets of this revolutionary technology, you'll be well-prepared to embrace its potential and unlock new opportunities for your small business to thrive in today's fast-paced, digital landscape!