Blockchain is like a digital ledger or record book where transactions are stored in blocks. Each block is like a page in this book, and once a page is written, it can’t be changed. Here’s how it works:
- Blocks: Think of these as containers. Each block contains a list of transactions, a timestamp, and a link to the previous block.
- Chain: These blocks are linked in chronological order, forming a chain. Each new block added to the chain links back to the previous one, making a long chain of blocks – hence, “blockchain.”
- Decentralization: Unlike a regular ledger where one person or entity (like a bank) keeps records, blockchain is managed by a network of computers (nodes). Every node has a copy of the entire blockchain, so there’s no single point of failure or control.
- Security: Once data is recorded in any given block, it’s very hard to change. Each block contains a unique code called a “hash” of the previous block, along with transaction data. If someone tries to alter a block, it would change this hash, making the tampering evident because all subsequent blocks would no longer match.
- Transparency: Because everyone in the network can see the transactions (though identities can be pseudonymous), it provides transparency. However, the details of who is doing what are secured through cryptographic means.
- Consensus: For a new block to be added, the majority of the network must agree it’s valid. This consensus mechanism ensures that no single entity can control what goes into the blockchain.
In simple terms, imagine if you had a notebook where every time you made a transaction with friends (like borrowing or lending money), you write it down, and everyone involved signs off on the entry. Then, this notebook is copied and each friend keeps a copy. If someone tries to change something in their copy, it won’t match with others, so the change is rejected. That’s blockchain but without the paper; it’s all digital, secure, and spread across many computers.
