How does blockchain work?
The underlying mechanism of blockchain software is very complex, however, blockchain software can automatically perform most of the steps.
We’ll give you a brief overview with the following steps:
1. Record transactions
A blockchain transaction shows the transfer of physical or digital assets from one party to another in the blockchain network. The transaction is recorded in the form of a block and may include the following details:
- Who was involved in the transaction?
- What happens during the transaction?
- When was the transaction made?
- Where was the transaction conducted?
- Why did you make this transaction?
- How many assets were exchanged?
- How many prerequisites are met during the transaction?
2. Reach a consensus
A majority of participants in a distributed blockchain network must agree that a recorded transaction is valid. Depending on the type of network, the rules for reaching an agreement may differ, but are usually set when the network is first established.
3. Link blocks
Once participants reach a consensus, the transactions in the blockchain will be written into blocks, which are equivalent to pages in the ledger. Along with the transaction, a cryptographic hash is also appended to the new block. This hash acts as the chain that links the blocks together. If the contents of a block are modified intentionally or unintentionally, this hash value will also change, which will provide a way to detect data tampering.
Therefore, blocks will be securely linked to the chain and you cannot edit them. Each additional block strengthens the verification of the previous block, and therefore the entire blockchain. It’s like stacking blocks to build a tower. You can only stack blocks on top of the previous level of blocks, and if you remove a block from the middle of the tower, the entire tower will collapse.
4. Shared ledger
The system distributes the latest copy of the central ledger to all participants.
