How Does Blockchain Work: The Process

Firstly, a user or a node will initiate a transaction signing it with its private key. Basically, the private key will generate a unique digital signature and make sure that no one can alter it. In reality, if anyone tries to modify the transaction information, the digital signature will change drastically, and no one will be able to verify it. Therefore, it will be dismissed.

After that, the transaction will get broadcasted to the verifying nodes. Basically, here, the blockchain platform can use different methods to verify whether the transaction is valid or not. There methods or algorithms are called consensus algorithm.

Anyhow, once the nodes verify that the transaction is authentic, it will get a place in the ledger. Also, it will contain a timestamp and a unique ID to secure it further from any alteration.

The block will then link up to the previous block, and then a new block will form a link with this block and so on. And this way, it creates a chain of blocks, thus the name blockchain.The Three Primary Components of Blockchain

Blockchain can actually be thought of as the combination of several different existing technologies. While these technologies themselves aren't new, it is the ways in which they are combined and applied which brought about blockchain. According to CoinDesk, these three component technologies are:

Private key cryptography
A distributed network that includes a shared ledger
Means of accounting for the transactions and records related to the network

Private Keys

To illustrate the technology of private cryptographic keys, it helps to envision two individuals who wish to conduct a transaction online. Each of these individuals holds two keys: one of these is private and one is public. By combining the public and private keys, this aspect of cryptography allows individuals to generate a secure digital identity reference point. This secure identity is a major component of blockchain technology. Together, a public and a private key create a digital signature, which is a useful tool for certifying and controlling ownership.
Distributed Network

The digital signature of the cryptography element is then combined with the distributed network technology component. Blockchain technology acts as a large network of individuals who can act as validators to reach a consensus about various things, including transactions. This process is certified by mathematical verification and is used to secure the network. By combining the use of cryptographic keys with a distributed network, blockchain allows for new types of digital interactions.
Process of Confirmation

One of the most important aspects of blockchain technology is the way that it confirms and validates transactions. In the example above, in which two individuals wish to conduct a transaction online, each with a private and a public key, blockchain allows the first person (person A) to use their private key to attach information regarding the transaction to the public key of the second person (person B). This information together forms part of a block, which contains a digital signature as well as a timestamp and other relevant information about the transaction, but not the identities of the individuals involved in that transaction. That block is then transmitted across the blockchain network to all of the nodes, or other component parts of the network, which will then act as validators for the transaction.

All of this sending of information and validating of blocks requires huge amounts of computing power. In practical terms, it may seem unrealistic to expect millions of computers around the world to all be willing to dedicate computing power and other resources to this endeavor. One solution to this issue for the blockchain network is mining. Mining is related to a traditional economic issue called the "tragedy of the commons." Put simply, this concept summarizes a situation in which individuals who each act independently in their own self interests tend to behave in ways contrary to the common good of all users as a result of depleting a resource through their action at a collective level. In the process of blockchain validation, an individual who gives up a small portion of his or her computational power in order to provide a service to the network thereby earns a reward. By acting out of self-interest (aiming to earn the reward: in this case, a small amount of a cryptocurrency), that person has been incentivized to help serve the needs of the broader network.