Blockchain technology operates through a decentralized network of computers, or nodes, that collectively maintain a shared ledger of transactions. When a new transaction occurs, it is broadcast to the network and validated by multiple nodes using a consensus mechanism. Once validated, the transaction is grouped with other transactions to form a block, which is then added to the blockchain.
The process of adding a new block to the blockchain involves several steps. First, transactions are collected and verified by network nodes. This verification process typically involves checking the validity of the transaction and ensuring that the sender has sufficient funds to complete the transaction.
Once verified, the transactions are grouped together into a block. Each block contains a cryptographic hash of the previous block, creating a chain of blocks that are linked together. This linkage ensures the integrity and immutability of the blockchain, as any attempt to alter a block would require changing all subsequent blocks in the chain.
After the block is formed, it undergoes a consensus process to determine its validity. Consensus mechanisms such as proof of work or proof of stake are used to ensure that all nodes in the network agree on the state of the blockchain. In proof of work, nodes compete to solve complex mathematical puzzles, with the first node to solve the puzzle being rewarded with the right to add the block to the blockchain. In proof of stake, nodes are selected to validate transactions based on the amount of cryptocurrency they hold.
Once a consensus is reached, the block is added to the blockchain, and the transaction is considered confirmed. The new block is then propagated to all nodes in the network, ensuring that everyone has a copy of the updated blockchain.
One of the key benefits of blockchain technology is its transparency and immutability. Since the ledger is distributed among all network participants, anyone can view the transaction history at any time. Additionally, once a transaction is recorded on the blockchain, it cannot be altered or deleted, ensuring the integrity of the data.
Overall, blockchain technology provides a secure and transparent way to record transactions and transfer value without the need for intermediaries. By eliminating central points of control and introducing decentralized consensus mechanisms, blockchain has the potential to revolutionize industries and create new opportunities for innovation and collaboration.