Blockchain is a decentralized, distributed ledger technology that allows digital information to be recorded in a secure and transparent way. The blockchain is made up of a network of computers (nodes) that work together to validate and store transactions. Here’s how it works:
Transactions: Transactions are the building blocks of the blockchain. They involve transferring digital assets (such as cryptocurrencies) from one user to another.
Validation: Once a transaction is initiated, it is verified by a network of nodes using complex algorithms. These nodes work together to ensure that the transaction is legitimate and not fraudulent.
Block formation: Validated transactions are grouped together in a block. Each block contains a unique code (hash) that identifies it and links it to the previous block in the chain.
Consensus: Nodes in the network must agree on the contents of the block before it can be added to the chain. This is known as consensus.
Mining: Once a block is validated and added to the chain, nodes that participate in this process (called “miners”) are rewarded with digital assets.
Security: The blockchain is designed to be secure and tamper-proof. The distributed nature of the network means that there is no central point of failure or vulnerability, making it difficult for hackers to manipulate the data.
Overall, blockchain technology provides a way for people to securely and transparently transact with each other without the need for intermediaries like banks or other financial institutions.