How Blockchain Works - Explained Simply

Blockchain is the technology that powers cryptocurrencies like Bitcoin and Ethereum, but it’s much more than just a tool for digital money. At its core, blockchain is a way of recording information so that it’s secure, transparent, and can’t be easily changed. If you’ve ever used a shared Google Doc, where everyone can see updates in real-time, you already have a rough idea of how blockchain works—except with blockchain, those changes are permanent and verified by many people at once.

A blockchain is a chain of “blocks,” and each block contains a group of transactions or pieces of data. When someone sends cryptocurrency or makes a transaction, it doesn’t go straight to the recipient. Instead, that transaction is added to a block along with others. Before this block becomes part of the chain, it must be verified by a network of computers called “nodes.”

These nodes check that the transaction is legitimate — for example, that the sender has enough funds and isn’t trying to cheat the system. Once a block is verified, it gets added to the chain in a way that can’t be undone or changed. This process creates a permanent, time-stamped history of all transactions, visible to anyone who wants to check it.

What makes blockchain special is that there’s no central authority, like a bank or company, controlling it. Instead, the system relies on consensus — meaning that all the nodes in the network must agree that a transaction is valid before it’s added to the chain. This makes blockchain very secure, since altering one part of the chain would require changing every block that comes after it, across thousands of computers.

Blockchains can be public (like Bitcoin’s), where anyone can join and verify transactions, or private, where access is limited to certain users. Both types are used in different ways — public blockchains for cryptocurrency and decentralization, and private ones for businesses that need secure, shared data.

In simple terms, blockchain is like a public digital notebook that everyone can read and write to, but no one can erase or tamper with. It builds trust through transparency, and that’s why it’s being used not only for money, but for things like voting, supply chains, healthcare records, and more.

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To sum up

How blockchain works

• Blockchain is a digital ledger that records data in blocks linked together in a permanent, unchangeable chain.
• Each block contains multiple transactions or data entries, verified by a network of computers (nodes).
• Verification is done through consensus — nodes must agree a transaction is valid before it’s added to the chain.
• Security comes from the decentralized nature and cryptographic linking of blocks — making tampering nearly impossible.
• Public vs Private blockchains: Public blockchains are open to anyone (e.g. Bitcoin), while private ones are restricted to certain participants (e.g. businesses).
• Real-world uses include cryptocurrency, voting systems, supply chain tracking, identity verification, and healthcare.
• No central authority controls the blockchain, increasing transparency and trust.