How Does a blockchain work ?

Blockchain is an online network system that stores the data of digital assets and their transaction history only. Once data is stored in the block it is next to impossible to modify it, thus it makes the blockchain safe for all kinds of transactions. But as a beginner, you need to have proper knowledge about the basics of this crypto industry. So, this presentation is all about the information related to how a blockchain works. Read out this piece of blog to understand the basics of it. We tried to simplify the explanation as much as possible.

What do you understand by blockchain?

To start with the basics, here we have the simple meaning of the blockchain industry for you to help you understand this place better. A blockchain is a decentralized ledger that records transactions across many computers. This decentralized nature makes it secure because altering any transaction would require changing it on every computer in the network, which is nearly impossible. Each transaction is recorded in a “block,” and these blocks link together in a chain, hence the name blockchain.

What are the Types of Blockchain Wallets?

There are two main types of blockchain wallets: hot wallets and cold wallets.

  • Hot Wallets: These are connected to the internet. They include web wallets, mobile wallets, and desktop wallets. They are convenient for frequent transactions but can be more vulnerable to hacking.
  • Cold Wallets: These are offline wallets, such as hardware wallets and paper wallets. They are less susceptible to online threats, making them more secure for long-term storage.
Public and Private Keys on blockchain

A key concept in blockchain wallets is the use of public and private keys.

  • Public Key: This is like your email address. You share it with others to receive cryptocurrency. It’s generated from your private key and can be freely shared without compromising your security.
  • Private Key: This is like your email password. You must keep it secret because it allows you to access and control your cryptocurrency. If someone else gets your private key, they can access and transfer your funds.

How do Transactions Work on blockchain?

Here’s a simplified process of how transactions work in a blockchain wallet:

  • Creating a Transaction: You start by entering the recipient’s public key and the amount you want to send into your wallet.
  • Signing the Transaction: Your wallet uses your private key to sign the transaction. This signature proves you have the right to send the cryptocurrency and ensures the transaction can’t be altered by anyone else.
  • Broadcasting the Transaction: The signed transaction is then sent to the blockchain network, where it is verified and added to the blockchain. This involves miners or validators confirming the transaction by solving complex problems. Once confirmed, the transaction is recorded on the blockchain, and the recipient’s balance is updated.

What is the Wallet Address?

A wallet address is a unique string of characters derived from your public key. It functions like a bank account number in the traditional financial system. You give this address to others to receive cryptocurrency.

Security Features of Blockchain

Blockchain wallets employ several security measures to protect your funds:

  • Encryption: Wallets encrypt your private keys and transaction data to prevent unauthorized access.
  • Backup and Recovery: Most wallets provide a backup option, often in the form of a recovery phrase or seed phrase—a series of words that can be used to restore your wallet if you lose access.
  • Two-Factor Authentication (2FA): Many wallets offer 2FA, adding an extra layer of security by requiring a second verification step when accessing your metamask wallet.

Custodial vs. Non-Custodial Wallets

  • Custodial Wallets: These wallets are managed by a third party, such as an exchange or service provider, which holds your private keys. They are convenient but require you to trust the third party with your keys.
  • Non-Custodial Wallets: These wallets give you full control of your private keys. You are responsible for securing and managing them, providing more security but also more responsibility.


A blockchain wallet is a powerful tool for managing cryptocurrencies. It allows you to store, send, and receive digital assets securely by managing cryptographic keys. Understanding how these wallets work, from public and private keys to transaction processes and security features, empowers you to navigate the world of digital currencies with confidence. As the popularity of cryptocurrencies continues to grow, blockchain wallets will remain a vital component in the digital finance ecosystem.

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