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Explaining The Blockchain Network Process: What It Is And How It Works

07-Nov-2022 Anirudh Trivedi
Explaining The Blockchain Network Process: What It Is And How It Works

Key Takeaways:

  • Blockchain tech is a collection of different nodes or servers that enables decentralization and immutability. 

  • Blockchain is often referred to as the new internet since it powers the revolution of Web 3.0. 

  • The blockchain network process has two main stages — the transaction confirmation and the creation of new blocks. 

  • Blockchain has theoretically infinite use cases, and we might see blockchain as something that could be used in every walks of life soon.

The blockchain is often referred to as the new internet, and this is because it has the potential to exceed the scope of its predecessor in terms of adoption, usage, and implications. The blockchain is a type of distributed ledger that records transactions in a continuous chain of data.


It uses cryptography to ensure that transactions are recorded accurately and can't be tampered with. Businesses are now exploring ways to leverage this technology for their own processes. This post will explain the blockchain network process: what it is and how it works!

What is a Blockchain Network?

A blockchain network process is a type of distributed ledger that records transactions in a continuous chain of data. Think of it as a server made up of different computers around the world that are then used for transacting cryptocurrencies, data, or even fiat. 

Blockchain is a liquid layer; like the internet, developers can virtually build anything on it in the form of smart contracts using APIs or codes. In layman's terms, Web 3.0 is powered by the blockchain; developers can build an ecosystem on top of the blockchain.

Blockchain, being an immutable entity, does not work in a standard way; the ledgers are immutable in nature, meaning the data, once entered, cannot be changed. These small servers or nodes that we talked about earlier operate under different algorithms. Most of them require some kind of stake or power to work seamlessly, but more on that later.  

How Does The Blockchain transaction Process Work?

As mentioned above, the blockchain network process works by recording all transactions in an open and distributed ledger. This ledger is stored and maintained by a network of computers. The transaction data is verified and updated by the network. They ensure that every participant has a copy of the ledger.

This network maintains a consensus about the authenticity of the data. The blockchain network process has two main stages — the transaction confirmation and the creation of new blocks. To initiate a transaction, a user has to complete a transaction confirmation. This involves finding a network puzzle solution. Once the transaction is confirmed, it is added to a new block. Each block has a unique identifier, and it's added to the existing blocks to form a chain.

These puzzles' complexity linearly increases with increasing time, provided that the network is constantly growing and the computing capability of the network makes sure that a 51% attack is not happening and the transaction timings are fixed.

Benefits of Blockchain Network - Transparency and Immutability


All transactions in the blockchain network process are publicly accessible and can be seen by everyone. This helps in the complete transparency of all business activities. Investors can make well-informed decisions when they have access to a transparent blockchain network process. This allows them to know where their money is going and how it is being used. 


Blockchains are immutable in nature, and hence they cannot be altered, meaning false transactions or unverifiable forgeries can now be detected. Immutability brings trust to investors and other concerned parties, including regulatory entities. 

Limitation of Blockchain Network Process - Scalability and Transaction Cost


The blockchain network process is facing scalability issues. This is due to the heavy transaction load on the network. The high transaction volume has resulted in long processing times. As a result, almost all blockchains are congested during peak trading times and increase market volatility. 

Transaction cost

Blockchains like Ethereum have high transaction costs or gas fees; being the most extensive blockchain network, the high volume and adoption of Ethereum brought up the token price resulting in higher gas fees, which resulted in less scalability and less retail usage. While there are many EVM-compatible blockchains and L2 blockchains that could be used as an alternative, this led to other problems, including transaction speed and security. This is referred to as the blockchain scalability trilemma

The Merkle tree and smart contracts

The Merkle tree is a data structure that stores the data in the blockchain network process. It helps hold the data in a condensed form and makes it easy to verify. It maintains a structured hierarchical tree where every leaf node is linked to its two parent nodes. 

Smart contracts are computer programs that are executed when certain conditions are met. The blockchain network process can be used to create decentralized applications. It can also be used to develop and execute smart contracts.

Blockchain consensus mechanisms - PoW and PoS

To add a new block, a computer or a node has to solve a complex puzzle. This process is known as mining, and the computer that solves it first is rewarded with a block reward. This is done to ensure that malicious parties don't take over the blockchain network process. 

Proof of Work

The Proof of Work consensus mechanism requires miners to solve complex mathematical puzzles. This is done to verify the authenticity of a transaction. This mechanism ensures that the network doesn't get hacked. PoW miners use their device's computation power to verify these transactions.

Proof of Stake

The proof of stake consensus mechanism requires validators to solve these puzzles that are done by staking or delegating their cryptocurrencies for a predetermined rate of interest.

Blockchain use cases

Blockchain technology has various use cases; as mentioned above, it is a liquid tech that can be used to build virtually anything. Hence, it has multiple use cases across different sectors.


The blockchain network process can be used to create a decentralized exchange. This can help in making the financial sector more transparent and efficient. 

Digital art

Before blockchain, the digital art industry suffered from many problems, including fakes, copyright, and plagiarism. 


The blockchain network process can be used to create digital identities. It can also be used to automate business processes.

Health Care

The blockchain network process can be used to store a person's health records. This will help in providing a consolidated health record for the patient. This will help the doctor to get a complete history of the patient.

Health Insurance 

The blockchain network process can be used to store health insurance records. This will make it easier for an individual to get health insurance coverage.

Wrapping up

Blockchain technology is a disrupting technology that is destined to change the world as we see it now. Blockchain technology has the potential to reduce scams, make the internet more accessible and safer and streamline businesses. It is indeed the future technology that is owned and operated by all. Making sure the future is guided by what the masses want by deploying a voting mechanism that cannot be tampered with. 

We are stepping into a new era powered by blockchain technology that will be a better, safer, and trustless environment for everyone. 

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