What is Blockchain? How does Blockchain work? How is the application?

What is blockchain technology?\

Blockchain technology is an advanced database mechanism that enables transparent information sharing within a business network. Blockchain databases store data in blocks that are linked together in a chain. The data has chronological consistency because you cannot delete or modify the chain without consensus from the network. Therefore, you can use blockchain technology to create a ledger that cannot be edited or changed to keep track of orders, payments, accounts, and other transactions. The system has built-in mechanisms to prevent unauthorized transaction entries and create consistency in the overall view of these transactions.

Why is blockchain important?

Traditional database technologies pose many challenges in recording financial transactions. For example, consider the sale of a property. Once the money has been delivered, ownership of the property is transferred to the buyer. Both buyers and sellers can individually record monetary transactions, but neither source is reliable. Sellers can easily claim that they haven't received the money even if they have, and buyers can also argue that they have transferred the money even if they haven't paid.

To avoid possible legal problems, a trusted third party is required to monitor and authenticate transactions. The presence of this central authority not only complicates the transaction, but also creates a loophole. If the central database is compromised, both parties can suffer losses.

Blockchain mitigates such problems by creating a decentralized, tamper-proof system for recording transactions. In the case of asset transactions, the buyer and seller are both created by the blockchain for a separate ledger. All transactions must be approved by both parties and automatically updated to both's ledgers in real time. Any previous transactions with any errors will cause the entire ledger to falsify. Those characteristics of blockchain technology have led to the technology being used in various fields, including the creation of digital currencies like Bitcoin.

How are different industries using blockchain?

Blockchain is an emerging technology that is being adopted by various industries in an innovative way. Below, we will describe some of the use cases in different industries:


Energy companies use blockchain technology to create peer-to-peer energy trading platforms and streamline access to renewable energy. For example, consider the following use cases:

  • Blockchain-based energy companies have created a trading platform for individuals to buy and sell electricity. Homeowners with solar panels use the platform to sell their excess solar energy to neighbors. The process is largely automated: smart meters generate transactions and the blockchain records these transactions.
  • With blockchain-based crowdfunding initiatives, users can fund and own solar panels in communities without access to energy. Donors can also receive rent from these communities once the solar panels have been built.


Traditional financial systems, such as banks and stock exchanges, use blockchain services to manage online payments, accounts, and market transactions. For example,  Singapore Exchange Limited , an investment corporation providing financial transaction services across Asia, uses blockchain technology to build a more efficient interbank settlement account. By adopting blockchain, they have solved many challenges, including batch processing and manual reconciliation of thousands of financial transactions.

Media and entertainment

Companies in the media and entertainment sectors use blockchain systems to manage copyright data. Copyright verification is important for artists to receive fair compensation. Multiple transactions are required to record the sale or transfer of copyrighted content. Sony Music Entertainment Japan  uses blockchain services to manage digital rights more efficiently. They have successfully used a blockchain strategy to improve productivity and reduce royalty processing costs.


Retail companies use blockchain to track the movement of goods between suppliers and buyers. For example, retail company Amazon has filed a patent for a distributed ledger technology system that will use blockchain technology to verify that all goods sold on the platform are trusted. Amazon sellers can map their global supply chains by allowing participants such as manufacturers, shippers, distributors, end users, and secondary users to add events to their books. the one after registering with the certification authority.

What are the characteristics of blockchain technology?

Blockchain technology has the following main characteristics:


Decentralization in the blockchain refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group) to a distributed network. Decentralized blockchain networks use transparency to reduce the need for trust among participants. These networks also prevent participants from exerting authority or control over each other in ways that undermine the functioning of the network.


Immutable means that something cannot be changed or changed. No participant can forge a transaction once someone has recorded it in the shared ledger. If the transaction record has an error, you must add a new transaction to compensate for the error and both transactions are displayed in the network.


A blockchain system that establishes rules for the consensus of participants that allows transactions to be recorded. You can only record new transactions when the majority of network participants agree.

What are the main components of blockchain technology?

The blockchain architecture has the following main components:

Distributed Ledger

A distributed ledger is a shared database in a blockchain network that stores transactions, such as a shared file that everyone on the team can edit. In most shared text editors, anyone with editing permission can delete the entire file. However, distributed ledger technology has strict rules about who can edit and how. You cannot delete entries after they have been recorded.

Smart contract

Companies use smart contracts to self-manage business contracts without third-party assistance. These are programs stored on a blockchain system that automatically run when certain conditions are met. They run if-then condition checks so that transactions can be completed reliably. For example, a logistics company could set up a smart contract that automatically pays when goods arrive at the port.

Public key encryption

Public key cryptography is a security feature that uniquely identifies participants in a blockchain network. This mechanism generates two sets of keys for network members. A key is a public key shared by everyone in the network. The remaining key is the unique private key of each member. The private and public key codes work together to unlock the data in the ledger.

Example: John and Jill are two members of the network. John records a transaction encrypted with his private key. Jill can decrypt this transaction with her public key. In this way, Jill is confident that John has made the transaction. Jill's public key will not work if John's private key is forged.

How does blockchain work?

While the underlying blockchain mechanisms are complex, we will present a brief overview in the following steps. Blockchain software can automate most of the following steps:

Step 1 – Record the transaction

A blockchain transaction shows the movement of physical or digital assets from one party to another within the blockchain network. The transaction is recorded as a block of data and may include the following details:

  • Who participates in the transaction?
  • What happened during the transaction?
  • When does the transaction happen?
  • Where does the transaction happen?
  • Why did the transaction happen?
  • How much of the property is exchanged?
  • How many prerequisites were met during the transaction?

Step 2 – Reaching Consensus

Most participants on a distributed blockchain network must agree that the recorded transaction is valid. Depending on the type of network, the rules of agreement can vary but are usually established at the start of the network.

Step 3 – Linking the Blocks

Once the participants have reached a consensus, transactions on the blockchain are written to the block, the equivalent of a page in a ledger. Along with the transactions, a cryptographic hash is also added to the new block. The hash function acts as a chain that links the blocks together. If the contents of the block are intentionally or unintentionally modified, the hash will change, providing a way to detect tampered data.

Therefore, the blocks and chains are linked securely and you cannot edit them. Each re-added block enhances the previous block verification and thus strengthens the entire blockchain. This is like stacking blocks of wood to form a tower. You can only stack blocks on top, and if you pull a block in the middle of the tower, the whole tower will collapse.

Step 4 – Share Ledger

The system distributes the latest copy of the central ledger to all participants.

What types of blockchain networks are there?

There are 4 main types of decentralized or distributed networks in the blockchain:

Public blockchain network

Public blockchains do not require permissions and anyone is allowed to participate. All members of this blockchain have equal rights to read, edit and validate the blockchain. People mainly use public blockchains to exchange and mine cryptocurrencies like Bitcoin, Ethereum, and Litecoin.

Private blockchain network

A single organization controls private blockchains, also known as managed blockchains. This agency determines who can be a member and what rights they have in the network. Private blockchains are only partially decentralized because they have access restrictions. Ripple, a cryptocurrency exchange network for businesses, is an example of a private blockchain.

Hybrid blockchain network

Hybrid blockchains combine elements from both the private network and the public network. Companies can set up private, authority-based systems in addition to a public system. In this way, they control access to specific data stored in the blockchain while making the rest of the data public. They use smart contracts so that public members can check if private transactions have been completed. For example, hybrid blockchains can grant public access to digital currency while keeping bank-owned coins private.

Conjugated blockchain networks

A group of organizations that manage consortium blockchain networks. Pre-selected organizations share responsibility for maintaining the blockchain and deciding on data access. Industries in which multiple organizations share the same goals and benefit from shared responsibility often prefer blockchain networks. For example, the Global Shipping Business Network Consortium is a not-for-profit blockchain consortium that aims to digitize the shipping industry and strengthen cooperation between maritime operators.

What are blockchain protocols?

The term blockchain protocol refers to different types of blockchain platforms for application development. Each blockchain protocol adapts the underlying blockchain principles to suit a particular industry or application. Here are some examples of blockchain protocols:

Hyperledger Fabric

Hyperledger Fabric  is an open source project with a set of tools and libraries. Businesses can use this protocol to quickly and efficiently build their own blockchain applications. It is a general purpose modular framework that provides unique access control and identity management features. These features make the protocol suitable for a variety of applications, such as supply chain tracking and traceability, trade finance, loyalty and rewards programs, and clearing of accounts. financial assets.


Ethereum  is an open source, decentralized blockchain platform that anyone can use to build public blockchain applications. It Enterprise is designed for business use cases.


Corda is an open source blockchain project designed for enterprises. With Corda, you can build interoperable blockchain networks, doing business in a highly secure environment. Businesses can use Corda's smart contract technology to conduct business directly, delivering value. Most of Corda's users are financial institutions.


Quorum is an open source blockchain protocol developed from Ethereum. This protocol is specifically designed for use in a private blockchain network, where only a single member owns all the nodes, or in a federated blockchain network, where many members own a single member. part of the network.

How has blockchain technology evolved?

Blockchain technology dates back to the late 1970s, when a computer scientist named Ralph Merkle patented a Hash or Merkle tree. These trees are a computer science structure for storing data by linking blocks using cryptography. In the late 1990s, Stuart Haber and W. Scott Stornetta used Merkle trees to implement a system in which a document's timestamps could not be tampered with. This is the first case of blockchain in history.

This technology has continued to evolve over the following 3 generations:

First Generation – Bitcoin and Other Cryptocurrencies

In 2008, an anonymous individual or group of individuals known only as Satoshi Nakamoto built the “framework” for blockchain technology in its modern form. Satoshi's idea of ​​the Bitcoin blockchain used a 1MB block of information for Bitcoin transactions. Many features of the Bitcoin blockchain system still play a pivotal role in blockchain technology to this day.

Second generation – smart contract

A few years after the first generation coins appeared, developers started looking at blockchain applications beyond cryptocurrencies. For example, the inventors of Ether decided to use blockchain technology in asset transfer transactions. Their significant contribution is the smart contract feature.

The third generation – the future

As companies discover and deploy new applications, blockchain technology continues to improve and evolve. Companies are tackling the limitations of scale as well as computing power, and in this ongoing blockchain revolution, opportunities abound.

What are the benefits of blockchain technology?

Blockchain technology brings many benefits to asset transaction management. Below, we list a few of those benefits:

Advanced Security

The blockchain system provides the high level of security and trust that modern digital transactions require. There is always a fear that someone will manipulate the firmware to create fake currency for themselves. But the blockchain uses 3 principles of cryptography, decentralization and consensus to create a highly secure firmware system that is almost impossible to tamper with. There is not a single point of failure that kills the system and a single user will not be able to change the transaction records.

Improve efficiency

Business-to-business transactions can be time-consuming and create operational bottlenecks, especially when third-party regulatory and compliance agencies are involved. Transparency and smart contracts in the blockchain make such business transactions faster and more efficient.

Check faster

An enterprise must be able to securely create, exchange, store and reconstruct electronic transactions in a verifiable manner. The records in the blockchain are chronologically immutable, which means that all records are always ordered chronologically. The transparency of this data makes the test processing much faster.

What is the difference between Bitcoin and blockchain?

Bitcoin and blockchain can be used interchangeably, but they are two different concepts. Since Bitcoin is an early application of blockchain technology, people have unknowingly started using Bitcoin to refer to the blockchain, creating confusion about the term. But blockchain technology has many applications beyond Bitcoin.

Bitcoin is a digital currency that works without any centralized control. Bitcoin was originally created to conduct financial transactions online but now Bitcoin is considered a digital asset that can be converted to any other global currency, like USD or euro. A public Bitcoin blockchain network that creates and manages a central ledger.

Bitcoin Network

A public ledger records all Bitcoin transactions, and servers around the world keep copies of this ledger. These servers are like banks. Although each bank only knows about the amount of money their customers exchange, the Bitcoin servers know about every Bitcoin transaction in the world.

Anyone with a spare computer can set up one of these servers, called nodes. This is like opening your own Bitcoin bank instead of opening a bank account.

Bitcoin Mining

On the public Bitcoin network, members dig cryptocurrencies by solving cryptographic equations to generate new blocks. The system broadcasts each new transaction publicly to the network and shares it from node to node. About every 10 minutes, miners collect these transactions into a new block and add them permanently to the blockchain, acting as Bitcoin's final ledger.

Bitcoin mining requires significant computing resources and takes a long time due to the complexity of the software process. In return, the miners earn a small amount of cryptocurrency. Miners act as modern secretaries who record transactions and collect transaction fees.

All participants across the network reach a consensus on who owns which coins, using blockchain cryptography technology.

What is the difference between a database and a blockchain?

Blockchain is a special type of database management system that has more features than a regular database. In the following list, we describe some of the significant differences between traditional databases and blockchains:

  • Blockchain decentralizes control without compromising trust in existing data. Other database systems will not be able to do this.
  • Companies participating in a transaction cannot share their entire database. But in blockchain networks, each company has a copy of the ledger, and the system automatically maintains consistency between the two.
  • While in most database systems you can edit or delete data, in blockchain you can only insert more data.

What is the difference between blockchain and cloud?

The term cloud refers to computing services that are accessible online. You can access Software as a Service (SaaS), Product as a Service (PaaS), and Infrastructure as a Service (IaaS) from the cloud. Cloud service providers manage their hardware and infrastructure and provide you with access to these computing resources over the Internet. They provide more resources than just database management. If you want to participate in a public blockchain network, you will need to provide hardware resources to store your copy of the ledger. You can also use a server from the cloud for this purpose. Some cloud providers also offer a complete Blockchain as a Service (BaaS) from the cloud.

What is Blockchain as a Service?

Blockchain as a Service (BaaS) is a managed blockchain service that is provided by a third party in the cloud. You can develop blockchain applications and digital services while the cloud service provider provides the blockchain infrastructure and tools. All you have to do is customize the existing blockchain technology, making blockchain adoption faster and more efficient.

What are AWS Blockchain Services?

AWS Blockchain services  provide purpose-built tools to support your requirements. You can use these services to build everything from a centralized ledger that maintains an immutable record of transactions to a fully managed, multi-party blockchain network that eliminates intermediaries. AWS has a multitude of validated blockchain solutions from partners that support all major blockchain protocols, including Hyperledger, Corda, Ether, Quorum, etc. So you can develop applications. blockchain and ledger easier, faster, and more efficient with AWS. Here are some useful AWS Blockchain services:

Amazon's Quantum Ledger Database (Amazon QLDB)  is a fully managed ledger database that provides transparent, immutable, and cryptographically verifiable transaction logs. The service has a built-in log to store an entry that accurately records every data change in sequence. Logs are writable only, which means users can add data to the log but cannot overwrite or delete data.

Amazon Managed is a fully managed service that makes it easy to join public networks or create and manage scalable private networks using Hyperledger Fabric and Ether. Start using by  creating an AWS account today.