A blockchain is a distributed digital ledger that records transactions in a transparent, secure and immutable way. Think of it as a kind of digital ‘ledger’, but with one key difference – this ledger is replicated and distributed across multiple locations simultaneously (typically thousands of networked computers). Each transaction added is verified by the network, which makes it very difficult to change retroactively.
Key elements of a blockchain
- Blocks: The basic units that record data. Each block contains a group of transactions.
- Chain: Each block is cryptographically linked to the previous and the next, making the structure tamper-resistant.
- Distributed network: Instead of being stored on a centralized server, the blockchain is distributed among thousands of nodes around the world.
Basically, blockchain is the basis for many modern applications such as cryptocurrencies, smart contracts and data management.
How a blockchain works
Beyond theoretical concepts, understanding how blockchain operates in the real world is essential. Here’s how a blockchain works in practice:
1. Creating a transaction
The first step starts with someone initiating a transaction – let’s say someone sends 1 Bitcoin to someone else. The transaction is transmitted to the computer network that supports the blockchain.
2. Verifying the transaction
The computers in the network (called nodes) verify the transaction to make sure it is valid. In the context of Bitcoin, this means checking that the sender has enough money in their account and that the transaction complies with the rules of the network.
3. Block aggregation
Once verified, the transaction is grouped with other pending transactions in a new block.
4. Mining and encryption
The block is then “mined,” which means a computer on the network solves a complex math problem to encrypt and validate the block. After validation, the block becomes part of the chain.
5. Network distribution
The new block is added to the blockchain and copied to all computers in the network. It remains there forever, immutable.
If you want to learn more about blockchain technology, we invite you to the Abarai blog, where you will find a series of detailed articles. For up-to-date information on cryptocurrency prices, you can visit our dedicated page.