How Blockchain Works
1. Introduction to Blockchain
- Blockchain: A decentralized, distributed ledger that records transactions across many computers in such a way that the registered transactions cannot be altered retroactively. This ensures security and transparency.
2. Key Components
- Blocks: Each block contains a list of transactions. Once a block is completed, it is added to the chain.
- Chain: A sequence of blocks linked together. Each block contains a reference (hash) to the previous block.
- Nodes: Computers on the network that maintain and validate the blockchain. Each node has a copy of the entire blockchain.
3. Transaction Process
- Initiation: A transaction is initiated by a user and broadcast to the network.
- Verification: Network nodes validate the transaction using consensus mechanisms.
- Consensus Mechanisms: Methods used to agree on the validity of transactions. Common ones include:
- Proof of Work (PoW): Miners solve complex mathematical puzzles to validate transactions.
- Proof of Stake (PoS): Validators are chosen based on the number of coins they hold and are willing to "stake" as collateral.
- Inclusion in a Block: Validated transactions are grouped into a new block by miners or validators.
- Adding to the Blockchain: The new block is added to the blockchain, making the transaction permanent and immutable.
4. Security Features
- Hashing: Each block contains a unique hash of the previous block, ensuring that any alteration affects the entire chain.
- Decentralization: The distributed nature of blockchain makes it