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What is a Blockchain, and how does it work?

A blockchain is a type of computer program that allows a group of people to record and verify transactions without the need for a central authority. It works by creating a permanent, digital record of all the transactions that have occurred within the group.

Imagine that you and your friends are playing a game where you trade stickers with each other. Instead of just trusting that each person is being honest about how many stickers they have, you decide to create a record of all the trades that have happened. You might use a notebook to keep track of who has traded with whom and how many stickers each person has.

This notebook is like a blockchain. It records all the transactions that have happened and helps to ensure that everyone is being honest. The notebook can’t be altered or tampered with, because it’s shared by all the players and they can all see what’s written in it.

Now let’s say that one of your friends tries to cheat by saying that they gave you five stickers when they really only gave you three. The other players can check the notebook and see that this is not true. This helps to keep everyone honest and ensures that the game is fair.

A blockchain works in a similar way, but instead of a physical notebook, it’s a digital record that is stored on many different computers. This makes it even more secure and difficult to tamper with.

  1. When someone wants to make a transaction, they create a “block” that contains information about the transaction. For example, if Alice wants to send Bob some money, the block might contain information like the amount of money being sent, the time and date of the transaction, and a unique code called a “hash” that identifies the block.
  2. The block is then added to the “chain” of other blocks that have already been created. Each block in the chain contains a unique hash and a link to the previous block in the chain. This creates a chain of blocks that is permanent and cannot be altered.
  3. The block is then distributed to all the computers in the network. These computers, called “nodes,” verify the transaction to make sure it is legitimate. If the transaction is valid, the nodes add the block to their own copy of the blockchain.
  4. Once a block has been added to the blockchain, the transaction it contains is considered to be complete and cannot be changed. This creates a permanent and secure record of all the transactions that have occurred within the network.

This page was last updated on January 2, 2023.