Definition: The Blockchain is the most important concept behind cryptocurrency. It is the invisible technology that allows digital money to work without banks.

Imagine the Blockchain as a shared digital record book that is duplicated and stored across thousands of computers around the world. Every computer has an identical copy, so no single person can control it.

How Blockchain Works: The 5-Step Process

Step 1: The Transaction Starts

A transaction is simply a request to move crypto (or data).

• Action: You press “Send” on your wallet to move 1 ETH to a friend.

• Broadcast: This request is immediately sent out to all the computers in the network. Think of it as shouting a request across a crowded room of auditors.

Step 2: The Network Validates (Consensus)

Before the transaction can be officially recorded, the network must agree that it’s legitimate. This process of agreement is called Consensus.

Different blockchains use different methods to reach this agreement. Here are the two most common methods, explained simply:

Mechanism	Analogy	How it works
Proof of Work (PoW)	Solving a Hard Puzzle.	“Miners” (special computers) race to solve a complex math problem. The first one to solve it wins the right to add the new transactions. It’s secure but uses a lot of electricity.
Proof of Stake (PoS)	A Weighted Lottery	“Validators” are chosen randomly to check the transactions, based on how much crypto they have chosen to “lock up” (stake) as collateral. It’s much faster and more energy-efficient.

Step 3: Transactions are Grouped into a Block

 Once the network agrees the transactions are valid, they are grouped together with other validated transactions into a single Block.

Step 4: The Block is Sealed with a Code (Hashing)

This is the sealing step that makes the Blockchain tamper-proof:

• The Code: A unique digital code, called a Hash, is created for the new Block. This Hash is like a unique digital fingerprint based on all the data inside.

• The Link: This new Block’s Hash is automatically connected to the Hash of the Block that came before it. This creates the Chain.

• The Security: Because the Blocks are linked by these unique codes, if anyone ever tried to change a single transaction in an old Block, the fingerprint would change, and the link to the next Block would break. This change would be instantly rejected by the network.

Step 5:  The Block is Added to the Chain

The new, sealed, and verified Block is added to the end of the Blockchain, and a copy of the updated record is instantly shared with every computer on the network.

Finalized: At this point, your initial transaction is confirmed and permanent. It can never be removed or altered.