How a blockchain works

A blockchain is a decentralized, tamper‑resistant ledger that records transactions in a series of linked blocks. Here’s a concise overview of how it works: 1. **Blocks and Transactions** - Users create transactions (e.g., sending cryptocurrency). - Transactions are grouped together into a **block** by a node (often called a miner or validator). 2. **Hashing and Linking** - Each block contains a **cryptographic hash** of the previous block, its own data, a timestamp, and a **nonce** (a number used for proof‑of‑work). - The hash functions like a digital fingerprint; any change to a block’s contents would produce a completely different hash, breaking the chain. 3. **Consensus Mechanism** - Nodes must agree on which block is the next valid addition. - Common mechanisms: - **Proof‑of‑Work (PoW):** Miners solve a computational puzzle; the first to find a valid solution adds the block and receives a reward. - **Proof‑of‑Stake (PoS):** Validators lock up (stake) tokens; a pseudo‑random algorithm selects a validator to propose the next block, and they earn fees/rewards. - Consensus ensures the network stays synchronized and prevents double‑spending. 4. **Distribution and Immutability** - The blockchain is stored on many nodes worldwide. - Once a block is added and enough subsequent blocks are built on top of it, altering it would require re‑computing the proof‑of‑work (or re‑staking) for that block **and** all later blocks on **more than 50 %** of the network—a practically impossible task. - This makes the ledger **immutable** and highly resistant to tampering. 5. **Smart Contracts (optional)** - Some blockchains (e.g., Ethereum) support **smart contracts**—self‑executing code stored on‑chain that runs when predefined conditions are met. - They enable decentralized applications (DeFi, NFTs, DAOs, etc.) without a central server. 6. **Transparency and Pseudonymity** - All transactions are publicly visible on the blockchain, but participants are identified only by cryptographic addresses, not personal identities. **In summary:** A blockchain is a network of computers that collectively maintain a continuously growing list of blocks, each cryptographically linked to the previous one. Consensus rules determine which block is added next, ensuring security, decentralization, and immutability without a central authority.