How Does Blockchain Work?

The Mechanics of Blockchain

Blockchain combines cryptography, distributed networks, and consensus to create trustless, tamper-proof records. Here's the step-by-step flow.

The Transaction Lifecycle

1. A user initiates a transaction (e.g. send coins).
2. It's broadcast to a network of nodes.
3. Nodes validate it using consensus rules.
4. Valid transactions are bundled into a block.
5. The block is added to the chain and copied to all nodes.

Hashing Links the Chain

Block 1 hash: 000abc
Block 2 contains Block 1's hash → 000abc
Block 3 contains Block 2's hash → ...
// Tampering Block 1 changes its hash, breaking the chain

Consensus Mechanisms

Mechanism	How	Used by
Proof of Work	Solve puzzles (mining)	Bitcoin
Proof of Stake	Stake coins to validate	Ethereum

FAQs

What is mining?

Solving cryptographic puzzles to validate blocks and earn rewards (in Proof of Work). More in our Blockchain section.

Why is Proof of Stake popular now?

It uses far less energy than Proof of Work.