How Blockchain Works

Blockchain is the technology that powers cryptocurrency and many other digital applications. At its core, a blockchain is a distributed database that stores data across many computers (nodes). The key feature of a blockchain is that it ensures data is recorded in a way that's secure, transparent, and nearly impossible to alter after it's written.

Every time a transaction or action is made on the network, it gets recorded as a new "block" of data, which is then linked to previous blocks, forming a "chain" of blocks—hence, the name blockchain. The decentralized nature of blockchain makes it resilient to tampering and hacking because no single entity controls the entire chain.

Simple Definition:

Blockchain is a shared record or digital ledger of all transactions that can't be changed. Once something is written into the blockchain, everyone can see it, and it's very hard to alter.

Key Concepts:

• Decentralization: Instead of relying on one central server or authority, blockchain is maintained by a network of computers. This means no single person or company has control over the entire blockchain.
• Immutable: Once a transaction is added to the blockchain, it cannot be changed or erased. This makes blockchain a highly secure way to store information.
• Transparency: Blockchain records are public. Anyone can verify the transactions, which adds a level of accountability that isn't possible with traditional systems.
• Smart Contracts: These are self-executing contracts with the terms of the agreement directly written into code. They automatically execute when the conditions are met.

What's Next

Now that you have a solid understanding of what cryptocurrency is, let's explore how it's being used in the real world. In the next lesson, Uses of Cryptocurrency, we'll dive into the many ways people and businesses are applying digital currencies today.

From everyday transactions to transforming industries like finance, gaming, and supply chain management, you'll see how cryptocurrency is reshaping the way we exchange value. Join us as we explore these exciting use cases and discover the potential of digital currencies beyond traditional money.