How Does Blockchain Work?

To understand how blockchain works, imagine you are keeping a record of all your daily expenses. You note them in a notebook. But this notebook is unique—it’s shared with thousands of people. Whenever you make a new entry, everyone gets a copy, and once the entry is made, no one—not even you—can change or delete it. That’s what blockchain does.

Here’s the process in a simplified way:

1. Information (like a transaction) is recorded into a block.

    

2. Once the block is full, it is locked and linked to the previous block using a special mathematical code called a hash.

    

3. The next block does the same, linking itself to the last one.

    

4. This continues, creating a chain of blocks, hence the name blockchain.

    

Each block stores data and its own hash, along with the hash of the block before it. If someone tries to change data in one block, the hash changes—and that breaks the link with the next block. So the network rejects any tampering.

Why Is Blockchain So Secure?

Blockchain uses something called cryptography to keep data safe. Every block has a unique code (hash) and changing even a tiny bit of the data will change the hash completely. Because all blocks are connected, changing one will require changing every block after it. That’s almost impossible, especially on large blockchains like Bitcoin.

Also, blockchain is decentralized, which means it is not controlled by any single person or company. Everyone in the network has a copy of the same blockchain. If someone tries to change their copy, the rest of the network will notice and reject it.

Blockchain vs Traditional Databases

Traditional databases are stored in centralized systems. One authority controls it, such as a bank, a company, or a government. If that system is hacked, the data could be changed or deleted.

But blockchain is different:

• It is shared across many computers (called nodes).

   

• No single entity has complete control.

   

• Data is permanent and unchangeable once recorded.

   

• All transactions are transparent and traceable.

   

What Are Blockchains Used For?

Blockchain was first used with Bitcoin, a digital currency created in 2009 by someone (or a group) called Satoshi Nakamoto. The purpose was to create a way to send money without needing banks or any middlemen.

But today, blockchain is used in many areas beyond cryptocurrency:

Common Uses of Blockchain:

• Cryptocurrencies: Bitcoin, Ethereum, and many others run on blockchain.

   

• Banking: Faster, cheaper money transfers and record keeping.

   

• Healthcare: Secure medical record storage.

   

• Voting: Tamper-proof digital voting systems.

   

• Supply Chains: Track goods from factory to customer.

   

• Real Estate: Secure, transparent property records.

   

• Smart Contracts: Automated agreements that work without human intervention.

   

Step 1: Choose a Trusted Crypto Exchange

Pick an Indian or global exchange that:

• Supports INR deposits and withdrawals
• Is RBI-compliant and follows KYC/AML rules
• Has strong user reviews, liquidity, and support

 Popular crypto exchanges in India:

• WazirX
• CoinDCX
• ZebPay
• CoinSwitch Kuber
• Binance (global, widely used in India)

Step 2: Complete KYC Verification

To comply with Indian regulations, KYC (Know Your Customer) is mandatory.

You’ll need to upload:

• PAN card
• Aadhaar card or Passport
• Selfie/photo verification

This process usually takes a few minutes to a few hours.

Step 3: Deposit INR Funds into Your Account

Most Indian exchanges allow these payment options:

• UPI
• Bank Transfer (IMPS/NEFT/RTGS)
• Credit/Debit Cards (limited)
• Wallets (like Mobikwik, sometimes)

💡 Pro Tip: Use UPI or IMPS for fast and low-cost transfers.

Step 4: Choose the Cryptocurrency You Want to Buy

Begin with top, relatively safer coins:

• Bitcoin (BTC)
• Ethereum (ETH)
• Polygon (MATIC) – made by Indian developers
• Tether (USDT) – stablecoin to hedge volatility

Most apps show:

• Live market prices
• Price history
• Buy/Sell options in INR

Step 5: Place a Buy Order

You can:

• Buy instantly at the market rate
• Or place a limit order (buy at a target price)

Example:

• Want to buy ₹1,000 worth of Bitcoin
• Enter amount → Confirm → You now own crypto!

Step 6: Store Your Crypto Securely

Storage options:

• In-app wallet: Easy but less secure for large amounts
• Private wallet (non-custodial): Apps like MetaMask, Trust Wallet
• Hardware wallet: Best for long-term storage (e.g., Ledger, Trezor)

🛡️ Always enable 2FA, set strong passwords, and avoid sharing login info.

Step 7: Track, Sell, or Stake

After purchase, you can:

• Track prices in the app
• Sell anytime (24/7)
• Staking: Earn passive rewards on ETH, MATIC, etc.
• Convert into stablecoins to reduce exposure