Blockchain works by recording transactions in blocks that are linked together in a chain, creating a tamper-proof and transparent record of all transactions. Each block contains a timestamp, a hash of the previous block, and the data of the transaction. The network of computers (nodes) validates the transaction and adds the new block to the chain, ensuring consensus and immutability.
Here's a more detailed breakdown:
1. Transaction Initiation:
A transaction is initiated between two parties, for example, a payment or a record update.
2. Block Creation:
The transaction is packaged into a block of data, along with other recent transactions.
3. Block Validation and Consensus:
The block is then sent to the network of nodes, where it's validated by the network participants using a consensus mechanism, like proof-of-work or proof-of-stake.
4. Block Addition to the Chain:
Once validated, the block is added to the existing blockchain, creating a link to the previous block by using its hash.
5. Distributed Ledger:
The blockchain is then distributed across the network, making it a public and transparent record of all transactions.
6. Tamper-Proofing:
Because each block is linked to the previous one with a hash, any attempt to alter a block would change the hash, making it easily detectable by the network.
In essence, blockchain acts as a distributed, immutable, and transparent ledger, ensuring the integrity and security of the recorded data