How does a blockchain work?

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5:24 minutes
Watch Video
5:24 minutes

What are the mechanics of a blockchain? When we say that blockchains are ledgers, we’re describing the information that blockchains are made of. Every blockchain is composed of blocks and each block holds information about transactions. All transactions are confirmed and encoded using protocols specific to the technology of the blockchain being used. Every blockchain has rules that dictate what can and cannot be done. Any legal or valid action on the network, once written onto the blockchain, is virtually irreversible. All of the blocks which contain transactions are connected like links on an ever-growing chain. How do users use addresses to transfer coins on blockchains? Users of a blockchain are able to transfer coins or tokens from one address to another. For example, users that purchase Bitcoin are given control of their funds with private keys to addresses that hold Bitcoin. If you hold the private key of an address that contains any amount of Bitcoin, you can send your Bitcoin to any other valid Bitcoin address. This makes it so that no one can touch your coins without knowing a secret code that only you should have access to. How do blockchains remain accurate? Blockchains are able to remain safe, accurate, and secure because they are distributed. This means that they are stored on many different machines which are located in different locations across the world. Miners and nodes facilitate blockchain protocols by confirming and validating transactions. Each computing machine participating in any blockchain is constantly sending and receiving data to and from the network. Through this process, blockchains are able to maintain updated ledgers as well as cross-reference new transactions with old ones to verify that everything always adds up.

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