At its core, a blockchain is a decentralized and distributed digital ledger that records transactions across a network of computers in a secure, transparent, and tamper-resistant way.
Here's a simplified explanation of how it works:
1. **Decentralization:** Unlike traditional systems with a central authority (like a bank), a blockchain is decentralized. This means there's no single entity controlling the entire network. Instead, multiple computers (nodes) participate in maintaining and validating the blockchain.
2. **Blocks and Transactions:** Information is grouped into "blocks," and each block contains a list of transactions. These transactions could involve things like cryptocurrency transfers, smart contracts, or other data depending on the blockchain's purpose.
3. **Cryptography:** Each block is linked to the previous one through a cryptographic hash (a unique identifier). Changing anything in a block would require changing all subsequent blocks, making tampering practically impossible.
4. **Consensus Mechanism:** Before a new block is added to the blockchain, the network of nodes must reach a consensus to validate the transactions in that block. This process ensures agreement on the state of the blockchain and prevents malicious actors from manipulating the system.
5. **Immutability:** Once a block is added to the blockchain, it's extremely difficult to alter. The decentralized nature and cryptographic links between blocks make the entire history of transactions resistant to tampering.
In summary, a blockchain is like a digital ledger spread across a network, secured by advanced cryptography. It enables transparent, secure, and decentralized recording of transactions, eliminating the need for a central authority. This technology is fundamental to cryptocurrencies like Bitcoin and has applications beyond finance, such as supply chain management, voting systems, and more.
