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Blockchain and Distributed Ledger Technology: Notes for CS Professional

Updated 11 October 2026 · Fact-checked

A blockchain is a distributed ledger where transactions are grouped into blocks, linked by cryptographic hashes and copied across many computers. Nodes agree on new blocks through a consensus mechanism. To answer exam questions, define it, explain the working steps, compare types, then state the legal position.

Understand Blockchain and Distributed Ledger Technology

A distributed ledger is a record of transactions that is shared and kept by many computers (nodes) instead of one central owner. A blockchain is one kind of distributed ledger. So every blockchain is a DLT, but not every DLT uses blocks.

Transactions are collected into a block. Each block holds the transactions, a timestamp and the hash of the previous block. A hash is a fixed-length code produced from data by a one-way function. If anyone changes an old block, its hash changes, the link breaks and the other nodes reject it. This gives immutability in practice, meaning records are very hard to alter.

Nodes must agree on which block to add next. The rule they follow is the consensus mechanism. In Proof of Work, miners spend computing power to solve a puzzle, and the first to solve it adds the block. It is secure but uses a lot of energy. In Proof of Stake, validators lock up their own coins as a stake and are chosen to add blocks. If they cheat, they can lose the stake. It uses far less energy. Other models include delegated and practical Byzantine fault tolerance, which are common in permissioned networks.

Blockchains differ by who can join. A public blockchain is open to all and anyone can read and validate (for example Bitcoin). A private blockchain is run by one organisation that controls access. A consortium blockchain is run by a group of known organisations, such as banks. Public and open networks are permissionless. Private and consortium ones are permissioned.

A smart contract is a program stored on a blockchain that runs automatically when set conditions are met. For example, it can release payment when goods are recorded as delivered. A cryptocurrency is a digital asset that uses cryptography and a blockchain to record ownership. The legal questions are about contract validity, evidence, data protection, taxation and regulation of crypto assets. You should discuss these using the Indian Contract Act, 1872, the Information Technology Act, 2000 and the other laws taught in your study material.

Key rules to remember

Block structure: Block = transactions + timestamp + previous block hash + own hash; Linking each block to the previous hash is what makes tampering detectable.
Proof of Work vs Proof of Stake: PoW: right to add block = computing power spent; PoS: right to add block = coins staked; PoW is energy-heavy. PoS is energy-light but risks concentration among large holders.
Type by access: Public = permissionless; Private and consortium = permissioned; Use this to compare control, speed, privacy and trust.
Smart contract logic: IF condition met THEN action executes automatically; Legal validity depends on the essentials of a valid contract, not on the code alone.
Essentials of a valid contract: Offer + acceptance + lawful consideration + capacity + free consent + lawful object; Test a smart contract against these under the Indian Contract Act, 1872.

How to solve Blockchain and Distributed Ledger Technology questions

Use this method for any case-based or descriptive question on blockchain.

1Read the facts and identify what is asked: working, comparison, smart contract, crypto or legal risk.
2Define blockchain or DLT in one or two lines, using the terms block, hash, node and consensus.
3Explain the process in order: transaction created, broadcast to nodes, validated, grouped into a block, consensus reached, block added, ledger updated.
4Classify the network in the facts as public, private or consortium, and say who controls access.
5Apply the relevant law in plain words: contract essentials, electronic records and signatures under the IT Act, 2000, data protection and tax or regulatory rules as taught.
6Apply the law to the facts, naming the parties and the risks, such as jurisdiction, anonymity and irreversibility.
7Conclude with a clear view and practical advice, such as drafting terms, adding legal agreements around the code and keeping compliance records.

Quickest way: Define, work, compare, legal

When to use it: Use when you have about ten minutes for a theory or short-note question.

Write a two-line definition with block, hash, node and consensus.
List the working steps in five or six bullets.
Add a quick comparison of public and private, or PoW and PoS, in two or three points each.
Finish with two or three legal points: contract validity, evidence and regulatory risk.

Common mistakes in Blockchain and Distributed Ledger Technology

Treating blockchain and Bitcoin as the same thing.
Most news coverage links blockchain only to cryptocurrency.
Fix: State that blockchain is the technology and cryptocurrency is one application. Add other uses such as land records, supply chains and share registers.
Saying blockchain data can never be changed.
The word immutable is taken literally.
Fix: Say records are tamper-evident and very hard to alter. A group controlling most of the network, or a permissioned network's agreed rules, can change outcomes.
Mixing up Proof of Work and Proof of Stake.
Both names sound similar and both pick who adds the next block.
Fix: Link PoW to computing power and energy, and PoS to locked-up coins and penalties. Write one line on each.
Claiming a smart contract is automatically a valid legal contract.
Students assume code alone settles the legal position.
Fix: Test it against the essentials of a valid contract. Code can be evidence of agreement but does not replace consent, lawful object or capacity.
Calling every private blockchain fully decentralised.
Students ignore who controls access.
Fix: Say private chains are permissioned and controlled by one organisation, so they are less decentralised but faster and more private.
Giving theory with no link to the facts in a case question.
Students recall notes instead of analysing.
Fix: Name the parties, the type of network and the risk in the case, then apply the rule and conclude.

Worked examples

Example 1

Explain step by step how a transaction is added to a blockchain, and distinguish a public blockchain from a private blockchain.

Show the solution

Step 1: A user starts a transaction and signs it with a private key, which proves who sent it.
Step 2: The transaction is broadcast to the nodes in the network.
Step 3: Nodes validate it against the rules, for example that the sender has enough balance.
Step 4: Valid transactions are grouped into a block containing a timestamp and the previous block's hash.
Step 5: Nodes use the consensus mechanism, such as Proof of Work or Proof of Stake, to agree on who adds the block.
Step 6: The block is added, copied by all nodes and the ledger is updated. Changing it later would break the hash links.
Comparison: A public blockchain is open to anyone, is permissionless, is highly decentralised and shows transactions openly, but may be slower. A private blockchain is permissioned, controlled by one organisation, usually faster and more private, but is less decentralised and needs trust in the controller.

Answer: A transaction is signed, broadcast, validated, placed in a block, agreed through consensus and added to the chain. Public chains are open and decentralised. Private chains are permissioned and controlled by one entity.

Example 2

Rohan Traders Pvt. Ltd. in Pune and Kaveri Exports in Chennai agree that a smart contract on a consortium blockchain will pay ₹12,00,000 to Kaveri Exports automatically once the port records delivery of goods. The goods are delivered but damaged, and the port records delivery. Advise whether the smart contract is legally enforceable and what risks arise.

Show the solution

Step 1: Identify the issue. It is whether a contract in code is enforceable and who bears the risk of the automatic payment.
Step 2: State the rule. Under the Indian Contract Act, 1872, an agreement is enforceable if it has offer, acceptance, lawful consideration, competent parties, free consent and a lawful object. The IT Act, 2000 recognises electronic records and electronic signatures, so an electronic form does not by itself defeat validity.
Step 3: Apply. Both companies are competent, they agreed to exchange goods for ₹12,00,000, and the object is lawful. So the agreement can be a valid contract even though performance is by code.
Step 4: Identify the risk. The code checks only the recorded delivery, not the condition of the goods. Payment executes automatically and is hard to reverse, though the ledger records evidence of what happened.
Step 5: Advise. Rohan Traders can claim breach of the underlying sale terms and seek damages or a refund through the dispute process. Rohan Traders should have a written master agreement that states that the code gives effect to the contract, lists quality conditions, sets an inspection step before payment, and names the governing law and the dispute resolution forum.

Answer: The smart contract can be enforceable if the usual contract essentials are met, since electronic form is recognised. The automatic payment does not remove Rohan Traders' right to claim for damaged goods. The firm should add inspection checks and a written agreement around the code.

Exam tips

Write the working of blockchain as numbered steps. Examiners reward a clear sequence.
Prepare two comparison tables in your head, public vs private and PoW vs PoS, and write them as short parallel points.
For smart contracts, always test the essentials of a valid contract and mention electronic records under the IT Act, 2000. Do not quote a section unless you are sure of it.
In case questions, end with practical drafting advice such as a master agreement, a dispute forum and audit logs.
For crypto topics, state the legal position carefully as taught in your study material and avoid unverified claims.

Practice questions from Internet and Other Technologies

Blockchain and Distributed Ledger Technology in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Blockchain and Distributed Ledger Technology: frequently asked questions

How does blockchain work step by step?

A user signs a transaction and it is sent to the nodes. The nodes validate it, group it into a block and reach consensus. The block is then added to the chain and copied across the network, with each block linked to the previous one by a hash.

What is the difference between public and private blockchain?

A public blockchain is open to everyone and is permissionless. A private blockchain is controlled by one organisation and only approved users can join. Public chains are more decentralised, while private chains are usually faster and more private.

What is the difference between Proof of Work and Proof of Stake?

In Proof of Work, miners compete using computing power to add a block, which uses a lot of energy. In Proof of Stake, validators are chosen based on the coins they lock up as a stake and can lose it if they cheat. Proof of Stake uses much less energy.

Are smart contracts legally valid in India?

A smart contract can be a valid contract if it meets the essentials of the Indian Contract Act, 1872, such as consent, lawful consideration and lawful object. The IT Act, 2000 recognises electronic records and signatures. Code alone does not guarantee enforceability, so a supporting written agreement is wise.