How blockchain technology works

Blockchain is a revolutionary technology. It’s essentially a digital ledger of transactions that is duplicated and distributed across a network of computers.

Key Concepts

  • Blocks: Data is grouped into blocks.
  • Chain: Blocks are linked together chronologically, creating a chain.
  • Decentralization: No single entity controls the blockchain.
  • Cryptography: Secures the data and transactions.

Transaction Process

  1. A transaction is requested.
  2. The transaction is broadcast to the network.
  3. Network participants validate the transaction.
  4. Once verified, the transaction is grouped into a block.
  5. The block is added to the chain.

Security

Cryptography, specifically hashing, plays a crucial role in blockchain security. Each block contains a hash of the previous block, making it extremely difficult to alter any data.

ELI5 Blockchain

Imagine someone sends money. A “hash,” like a secret word, is created. This hash combines information about a solved math problem and the transaction. This ensures no one can fake the transaction. Each transaction is contained within notes about the solved math problem – these notes are called a block.

Learn more: Reddit ELI5

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