What is blockchain technology and how does it work?

Blockchain technology is a decentralized digital ledger that records transactions across multiple computers so that the record cannot be altered retroactively without the alteration of all subsequent blocks and the consensus of the network.

Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. This design ensures transparency and security. When a new transaction occurs, it is broadcast to a network of nodes, which validate it using consensus mechanisms like Proof of Work or Proof of Stake. Once validated, the transaction is added to a block, which is then linked to the chain.

Key features include:

  • Decentralization: No single entity controls the network.
  • Immutability: Once recorded, data cannot be changed.
  • Transparency: All transactions are visible to participants.