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What is Blockchain Technology and How Does It Work?

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Blockchain technology on blue background – 3D Rendering

Giới thiệu

Blockchain is a shared and immutable ledger that provides us with a way to record transactions and for tracking the assets in a business network. In the inherent design of blockchain, the data cannot be modified which makes it very secure for cybersecurity, payments, and other similar industries where data security is more important. 

Blockchain is a rapidly growing technology and it helped us in building trust, transparency, security, and the trackability of the data shared among a group of individuals or business network. It reduces the security and data breaches by the application of creating blocks and chaining them together. 

In this article, we are going to discuss the latest and growing Blockchain Technology. We’ll see how it works, what’s the fundamental behind this technology, its types, and much more. 

Công nghệ blockchain là gì?

There are three useful concepts under Blockchain that includes: blocks, nodes, and miners. 

Blocks: A Block is like a general block. However multiple blocks are used in the chain. Sometimes it is referred to as Distributed Ledger Technology (DLT) which makes the modification of any data or digital asset unalterable. Take a look at this DTL Properties

DTL Properties

Let’s take a simple example to understand Blockchain easily. Suppose you are using Google Docs and whenever you create a document and share it among other people. The actual document isn’t copied or transferred. Instead, it is distributed among the people you shared with. It is very similar to the decentralized distribution chain where everyone has access to the document and the modifications are recorded in real-time. 

Therefore, blockchain is just like a database where the encrypted blocks of data are stored and chained together to create a single reliable source for that data. The digital assets in blockchain technology are distributed instead of copying or transfer of the document. The digital asset that is being shared is accessible to everyone in real-time and the transparency is also made public. This way blockchain technology becomes more reliable and promising as it helps reduce the risk of fraud and data alteration.

Lịch sử của Blockchain

Blockchain is a new technology, but still, there’s an interesting history behind it. Let us see some important points from the History of Blockchain.

Lịch sử của Blockchain
  • In 1991, Blockchain was described by the research scientists W. Scott Stornetta and Stuart Haber. 
  • In 2004, an enthusiast cryptographic activist Hal Finney gave the introduction to the Reusable Proof of Work (RPoW). 
  • In 2008, Satoshi Nakamoto gave a theory about the Distributed blockchains and published “Bitcoin: A Peer to Peer Electronic Cash System.”
  • In 2009, Hal Finney and Satoshi Nakamoto successfully done with a Bitcoin (BTC) transaction by computer. 
  • In 2011, 1 Bitcoin’s value was set to $1 USD.
  • In 2012, Blockchain and cryptocurrency were also mentioned in some popular TV shows.
  • In 2014, PayPal announced its integration with Bitcoin (Bitcoin crypto is based on Blockchain technology).

Blockchain hoạt động như thế nào?

Blockchain collects the data from a group of individuals known as blocks and stores that information in its databases. The blocks that contain the data have a certain capacity to store that information and when the data is filled in these blocks, closed and linked with other blocks, it creates a chain of the data known as Blockchain. 

Let us see how Blockchain works in step-by-step below:

Blockchain has three components that contribute to the functioning of this technology. These three components are Blocks, hash, and nodes.

Step-1: Blocks

In this step, the data is stored in blocks where each block contains different types of data based on the type of blockchain. Suppose the data is about a cryptocurrency like Ethereum, then the blocks contain the information about the transactions, amount, sender, and receiver. This way, the information it stores is about the type of blockchain. 

Step-2: Hash

Hash works very similar to the methods used for authentication purposes such as a fingerprint. This hash is also included in the block. A hash is always computed on the creation of a block. And if anything is changed within the block, then the hash will also change. So, it keeps track of all the changes that are made. But making a change to any block requires the computation of a complex mathematical problem which is extremely difficult. 

When a block is successfully mined, then the change is accepted by the blockchain network. And in return for this, the miner is rewarded financially just like it works with Bitcoin or any other crypto miners. 

Step-3: Nodes

Decentralization is a very important concept when we talk about Blockchain technology. Any chain cannot be owned by a computer or an organization. But it is distributed among the computer and the organizations. This way the blockchain is nor copied neither transferred to the organization or a system. It is distributed via nodes. Where each node has its copy of the blockchain. The newly mined block is updated, trusted, and verified by the network algorithm. 


Blockchains growing rapidly with time? Introducing new functioning of this technology like smart contracts makes it more useful. This technology fascinated a large number of people by its successful operations in cryptocurrency and other industries. 

Individuals are realising that it is a very important concept and it should also be applied in other sectors such as tax calculation, e-notary, medical records, and others. 

Blockchains make the transactions easier and don’t include the involvement of third parties. This makes Blockchain more useful. 

Như chúng ta biết cryptocurrencies which are nothing but digital currencies. It is also true that cryptocurrencies are operated on Blockchain technology as it protects the cryptocurrencies by the application of complex encryption. Blockchain makes the transactions of cryptocurrencies more secure. That is why blockchain is more popular in the crypto-verse. However, it is sooner or later to be used in other sectors as well due to its solid security and encryption for the data. 

It is also popular because there are a lot of things that blockchain do like it allows the verification of authenticated user without being dependent on third parties. 

Các loại Blockchain

Blockchains are of four types that are as follows:

1. Public Blockchains: As the name suggests, these blockchains are public and accessible to anyone who wants to request or validate a transaction. These blockchains are open and decentralized networks of computers. 

2. Private Blockchains: In the case of Private blockchains, these are not accessible to the public as they are not open and restricted. Private blockchains are governed by a single entity which means they are not decentralized. 

3. Hybrid Blockchains: Hybrid blockchains are a combination of public and private blockchains. This means hybrid blockchains have both centralized and decentralized features. 

4. Sidechains: A sidechain is a type of blockchain that runs parallelly to the main blockchain. Users can move their digital assets between different blockchains which improve scalability and efficiency through the use of Sidechains. 

Transaction Process of blockchains


There are various ways that a transaction is processed in Blockchains. Here we’ll look at how the authentication is done by using cryptographic keys and the authorisation of crypto by proof of work. 

1. Authentication: The blockchain was not operated by any central authorities. As we already discussed it is a decentralized technology. But the transactions done within this technology are still authenticated by the use of cryptographic keys. A cryptographic key is nothing but a string of data that works like a password. Each user has different public and private keys to use. These keys are used for authentication purposes. 

2. Authorisation: When the transaction is allowed between different users, it should be approved by the authorisation. For public blockchains, the authorisation is to be done before any block is added to the chain. 

3. Proof of Work: Proof of work is required to add a block to the chain. To do that, the owner of the computers in that network needs to solve a complex mathematical problem. The process of solving a complex mathematical problem is known as mining. 

4. Mining Power: The power consumption for mining is very high. According to the Cambridge Bitcoin Electricity Consumption Index, the mining of bitcoin consumes around 70TWh of electricity in a year which is very high. Therefore, the transaction process of bitcoin or any other crypto will consume more power for mining. 

5. Proof of Stake: Blockchain also added one more protocol for validation of the stakeholders of the block, known as Proof of Stake. These protocols validate that the participants must have a stake in the blockchain. 

Hãy kiểm tra này khái niệm cơ bản về blockchainblockchain process.

What’s the Difference Between a Private Blockchain and a Public Blockchain?

In this section, we will see some differences between Public and Private Blockchain which are as follows:

Blockchain công cộng Blockchain riêng
1. Anyone can access these blockchains. It is also possible to read, write, and update the data in the blockchain.  1. In a private blockchain, the read, write, or update operations can only be done upon invitation. 
2. The network actors do not know each other in this blockchain.  2. Here, the network actors know each other as they are required to permit access for alteration in the blockchain network. 
3. Public blockchains are decentralized.  3. Private blockchains are centralized. 
4. It takes less time to complete transactions per second.  4. It takes more time to complete transactions per second. 
5. Bitcoin, Ethereum, Litecoin, and other public cryptocurrencies are an example of Public Blockchain.  5. EWF, B3i, and R3 are some examples of Private Blockchain. 

How Is Blockchain Used?


Blockchain technology is used in various industries such as supply chains, retail, financial services, healthcare, and others. 

Here are some common use cases of Blockchain technology:

1. Cryptocurrencies: Blockchain became popular when it is applied to cryptocurrencies. Crypto allows you to transfer values faster across the network. It doesn’t allow the interference of any centralized banks. 

2. Decentralized Banking: Blockchain helps the banking system grow more rapidly than traditional methods. Many banks are interested in the application of blockchain in their banking systems including Canadian Imperial Bank, UBS, and Barclays. 

3. Optimizing healthcare operations: Blockchain increases the speed of health insurance payments to the patients which makes the healthcare sector more strong. In addition, it also stores the medical data and records in its databases more securely. 

4. NFT marketplaces: NFT stands for Non Fungible Tokens which are digital tokens of things like clothing and paintings. Blockchain allows you to buy these tokens from NFT marketplaces. 

5. Automating advertising campaigns: Nowadays, marketing or advertising campaigns are getting smarter than traditional campaigns. For E.g. the targeted advertisements are shown to the customers based on their interests and recent activities. This is also done by blockchain technology. 

Ưu điểm của Blockchain

There are various advantages of Blockchain that includes the following:

1. Decentralized: Unlike traditional currency run by central banks, Blockchain is a decentralized technology which means it isn’t run by centralized banks or any other authority. Or we can also say that no single entity maintains the network. 

2. Immutable: Blockchain is immutable which means it cannot be changed or altered. To add a new block in the chain, the system should be capable of solving a complex mathematical problem which is also verified after the problem is solved. 

3. Transparency: Public blockchains are available to all and anyone can access this blockchain. It is also possible to view the transactions and their source code. But only the transactions that are done in public blockchains can be viewed. It also allows you to build new applications or any improvements that should incorporate into the blockchain. 

4. Trustworthy: The blockchain automates the transactions only when certain conditions are met including the authentication between both the parties. This makes the transaction more reliable between two parties who even do not know each other. 

5. Universal Banking: Although blockchain is a new technology, still it is adopted globally and people who do not have bank accounts can also use blockchain to store money. Blockchain is a great way to use banking features without having a bank account. The other reason for using blockchain as universal banking is that it protects against theft which is likely to happen when you have cash in your pockets or wallets. 

Nhược điểm của Blockchain

Having various advantages doesn’t mean that Blockchain is only beneficial. Here we’ll see some of the disadvantages of blockchain below:

1. Impact on Environment: As we all know that for adding a new block in the chain, the computers in the network need to solve the complex mathematical problem that consumes a lot of electricity. This consumption of electricity is very high that in turn impacts our environment. 

2. Scalability: This is a weakness of blockchain that it is not indestructible which means it can be destructed due to the scalability. The decentralization of blockchain comes at the cost of scalability. So, if you are trying to grow the blockchain networks, you’ll need to increase the speed and efficiency which is very hard. 

3. Overconsumption of Energy: Whenever a new block is added, the verification of that transaction requires a lot of energy. According to research, the Bitcoin transaction involved the consumption of 70TWh of electricity per year. 

4. Storage: Whenever we make transactions on the network, all the information is stored in the blockchain databases. But for an increased number of transactions, more storage will be required which becomes a challenge in this technology. 

5. Time-Consuming: The computation of the complex problem requires more time. As the mathematical problems are so complex and high-end systems are needed to solve these problems. So, if the system’s performance is not high, then it will consume a lot of time solving those complex problems.  

How to Invest in Blockchain?

There is a number of ways you can invest your money in blockchain directly. And you also don’t need an exchange-traded fund (ETF) to invest your money. 

You can invest your money in Blockchain in the following ways:

1. Buying Shares: You can use blockchain to buy shares through brokers such as Betterment and Vanguard.

2. Cryptocurrencies: There’s a variety of cryptocurrencies based on blockchain technology. You can buy cryptocurrencies like Bitcoin or Ethereum trực tiếp. 

3. By investing in Crypto mining companies: Various mining companies offer investors to participate directly in the equity of the companies. These companies include Riot, Marathon, Hive, etc. 

4. Mining Pools: This is an alternative to the investment in mining cryptocurrency by yourself. You can join mining pools and may get some chances of mining blocks of cryptocurrencies. 

Blockchain Decentralization

In the distributed network, blockchain decentralization refers to the decision-making from a centralized entity such as an organization, individual, or group of individuals and it also allows the transfer of control. The main function of decentralization is to reduce the level of trust and responsibility on a central entity. It also allows the distribution of equal power and control to all participants in the network. 

Blockchain is a peer-to-peer decentralized network where the efficiency to work with unknown parties increases without even knowing each other. It gives transparency and immutability to the network that enables to keep every record. 

Also, blockchain decentralisation is carried out on the architecture level where infrastructure failure is not encountered. However, each node on the network contains a copy of the information to make it easy the exchange information among different nodes. This makes it easy for blocks to be added to the chain. 

Blockchain có an toàn không?

To understand the security of blockchain, let us take a scenario. So, when you mine for a block in the network, there are a number of blocks in the network and if you get a block mined. Then it will ask you to solve a complex mathematical problem which needs your system to be powerful. It also consumes a lot of energy while solving the problem. So, this way, you solve the complex problem in order to get the block to add to your chain. The block that it will add or store holds a unique hash number that connects it with the previous block in the chain. So, each block has a unique hash number which cannot be changed or altered. This way, the security of blockchain comes into view. And you can now see, how secure is blockchain as it requires the solving of a complex mathematical problem and assigns the unique hash code to each block for authentication purposes and for adding that block to the chain. 

Bitcoin so với Blockchain

As we all know about Cryptocurrency Bitcoin and the technology Blockchain. Let us see some points for Bitcoin vs. Blockchain below:

  • Blockchain is a technology that supports the cryptocurrency Bitcoin whereas Bitcoin is a version of a blockchain distributed ledger system. 
  • There’s transparency in blockchain whereas bitcoin can be operated anonymously. 
  • Blockchain is used for the transfer of proprietary information and digital assets while bitcoin is only used for the transfer of digital currencies. 
  • Bitcoin is restricted only to the exchange of cryptocurrency, on the other hand, Blockchain has a variety of uses. 
  • Blockchain is a distributed database while Bitcoin is a cryptocurrency. 
  • The scope of bitcoin is limited, but the scope of blockchain is open and changes from time to time.

Blockchain vs. Banks

In this section, we will see how blockchain differs from banks. 

  • Blockchain technology offers a secure and reliable way to send payments without any interference from a third party that defeats the traditional banking system for sending payments. 
  • Based on a poll by European Payments Council, 90% of the members agreed that Blockchain technology will change the payment industry in upcoming years. 
  • R3 and Ripple work with banks for the traditional payment system resulting in increased efficiency of the sector. 
  • Blockchain is a result of the solution to complex mathematical problems whereas a bank is a ledger that just keeps the statement of existing currency and the transactions. 
  • The banking system is run by centralized banks whereas blockchain doesn’t have control of any authority and therefore is a decentralized technology. 

Kết luận

Blockchain is a rapidly growing technology with enhancements in its development. It enabled new developments such as smart contracts which are extremely useful for the automation of some processes. 

Various companies have also started to implement this technology in various fields such as tax calculation, the healthcare sector to keep medical records, e-notary fields, etc. Blockchain makes it easy for these platforms to make transactions and keep the records of these transactions more secure in the databases. It also reduces the involvement of third parties while doing these transactions. 

As we know cryptocurrencies are very popular nowadays and these are digital currencies that are operated on blockchain technology. Cryptocurrencies became more secure and reliable due to the implementation of blockchain technology in it. 

We discussed how blockchain technology works, and the features, demerits, and various comparisons are also carried out in this article. In conclusion, we can say that blockchain technology is one of the fastest-growing fields and if you are looking to make a career in this field, then this can be a better option. 

Blockchain Technology FAQs

What is a blockchain technology example?

The popular examples of implementation of blockchain technology are Bitcoin and Ethereum where anyone can connect with blockchain for the transaction of bitcoins and ether. The other example of blockchain is that it provides a secure way to transfer and receive payments internationally without building any trust between parties

4 loại công nghệ blockchain khác nhau là gì?

The 4 types of blockchain technology are
1. A public blockchain, accessible to anyone for example Bitcoin, Litecoin, Ethereum, etc.
2. A private blockchain is a restrictive blockchain operated only in a closed network. For example Multichain, Hyperledger blockchains, etc. 
3. Hybrid blockchains are a combination of public and private blockchains. For example Dragonchain.
4. Consortium blockchain, is a semi-decentralized blockchain which means some of its networks are managed by a centralized organization and the remaining part is run by decentralized banking.

Mục đích chính của blockchain là gì?

The main goal of blockchain is to allow the details of the digital transaction to be recorded and distributed. It also restricts the alteration of data. This way it creates a foundation for immutable ledgers where the digital data cannot be altered or deleted.

What is blockchain technology good for?

Blockchain technology is good for building trust among unknown parties from two different locations to make payments. It is also better for providing transparency and traceability of the data shared across the business network. 

Công ty blockchain lớn nhất là gì?

There are several large blockchain companies that include Chainalysis, Kraken, Uniswap, OpenSea, etc. Out of these, DocuSign is the biggest blockchain company that uses the Ethereum blockchain to record their customer agreements and other information about the transactions. It helped to create the prototype of a publicly accessible blockchain-based smart contract in 2015.

Blockchain có phải là tương lai?

There’s no doubt that blockchain can be the future. Blockchain will create an uncensorable repository of data and information which is reliable and trustworthy. This is the main characteristic of blockchain that may lead to its implementation in various fields. Hence, the blockchain is the future of the internet and many organizations sooner or later are looking to adopt this technology in their operations. 

What will replace the blockchain?

Some alternatives might replace blockchain in future that includes:
Cơ sở dữ liệu tập trung
Cơ sở dữ liệu phân tán
Lưu trữ đám mây
Ledger technologies
and Centralized ledgers.

Ai đã phát minh ra blockchain?

Blockchain was invented by Satoshi Nakamoto in 2009. But is still unknown whether Satoshi Nakamoto was an individual or a group of individuals. 

Is blockchain the next Internet?

As this technology builds trust among the unknown. It also encourages the reliability of data and the source by increasing the transparency in transactions and verification. Blockchain creates the repositories of data which is uncensored by any centralized bank or government. This is the main reason that may lead the blockchain the next Internet. 

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