Blockchain — Core Concepts
How Blockchain Works
A blockchain is a distributed ledger — a database replicated across many computers (nodes) that agree on its contents without a central authority.
Blocks
Transactions are grouped into blocks. Each block contains:
- A list of transactions
- A timestamp
- A hash of the previous block (linking them into a chain)
- A nonce (used in mining)
Hashing
Each block is identified by a cryptographic hash — a fingerprint generated from its contents. Change one byte → completely different hash. This makes tampering detectable.
Consensus
How do thousands of nodes agree on the “true” chain? Consensus mechanisms:
- Proof of Work (PoW): Miners solve a computational puzzle. First to solve it adds the block. Used by Bitcoin.
- Proof of Stake (PoS): Validators lock up coins as collateral. Selected proportionally to their stake. Used by Ethereum.
Decentralization
No single entity controls the chain. To alter history, you’d need to control >50% of the network’s power — prohibitively expensive on large networks.
Key Properties
| Property | What it means |
|---|---|
| Immutable | Once written, data can’t be changed |
| Transparent | Anyone can verify the full history |
| Trustless | No need to trust any single party |
| Decentralized | No single point of failure |
Common Misconception
“Blockchain = Bitcoin.” Bitcoin is one application of blockchain. The technology is used for smart contracts, supply chain tracking, digital identity, and more.