How Blockchain Works
Inside a blockchain. Transactions are grouped into BLOCKS (typically holding hundreds or thousands of transactions). Each block is given a CRYPTOGRAPHIC HASH (a unique fingerprint) and INCLUDES the previous block's hash. This LINKS each block to the one before — forming a CHAIN. Change anything in an old block, and its hash changes, and all later blocks' references break. The whole chain becomes obviously invalid.
Mining and consensus. New blocks are added by miners (PROOF OF WORK) or validators (PROOF OF STAKE) who prove they did work or staked currency. They earn rewards. Other nodes verify their work and add the block to their copies. Decentralization: no central authority decides — the network reaches CONSENSUS through algorithms. Bitcoin uses Proof of Work (PoW); Ethereum switched to Proof of Stake (PoS) in 2022 for energy efficiency.
Why does each block include the HASH of the previous block?
Tradeoffs at scale. SCALABILITY: blockchains are slower than centralized systems (Bitcoin: 7 tps; Ethereum: ~15-30 tps; Visa: 24,000 tps). Layer 2 solutions (Lightning Network, Polygon, Arbitrum) help. ENERGY: PoW (Bitcoin) is energy-intensive (entire countries' worth). PoS (Ethereum 2.0+) reduced this by 99%. PRIVACY: most blockchains are transparent but pseudonymous. Privacy-focused chains (Monero, Zcash) hide details cryptographically.
Build a Mini-Chain
On paper, draw 3 boxes (blocks). In each: a transaction, a "previous block hash" (just write the previous box's number), and the box's own number. Now imagine someone tampering with box 1 — see how box 2 and 3 references would no longer match. That's blockchain's tamper resistance.
Blockchain is one of the most-discussed technologies of the era. Knowing how it works at this level lets you cut through hype and evaluate real applications vs marketing.
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