Blockchain is a distributed ledger technology that provides a secure and transparent way to record and transfer data. The term “blockchain” refers to a chain of blocks, where each block contains a set of transactions that are validated and added to the chain by network participants known as nodes.
The blockchain network is maintained by a decentralized network of nodes that communicate with each other using a peer-to-peer protocol. When a new transaction is initiated on the network, it is broadcasted to all the nodes. Each node validates the transaction by checking if the sender has sufficient funds and if the transaction adheres to the network’s rules and protocols.
Once a transaction is validated, it is bundled together with other validated transactions to form a block. Each block contains a unique cryptographic hash, which serves as a digital signature that ensures the integrity of the data contained within the block. The hash of each block also includes the hash of the previous block, which creates a chain of blocks that are linked together in a chronological order.
To add a new block to the chain, the network participants must solve a complex mathematical puzzle known as a proof-of-work (PoW) or proof-of-stake (PoS). This process requires a significant amount of computational power or a large amount of stake in the network’s native cryptocurrency. The first node to solve the puzzle is rewarded with newly minted cryptocurrency and the right to add the new block to the chain.
Once a block is added to the chain, it cannot be altered or deleted without consensus from the network participants. This makes the blockchain an immutable and tamper-proof ledger that is resistant to fraud and hacking attempts.
Overall, blockchain technology offers a decentralized, secure, and transparent way to store and transfer data. It has the potential to transform various industries by enabling trustless transactions, reducing transaction costs, and increasing efficiency and accountability.