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How does blockchain technology work at a technical level?


Blockchain technology operates at a technical level through a combination of key concepts and components that work together to create a secure and tamper-resistant ledger of transactions.

Here's a simplified overview of how blockchain technology works:
Decentralization and Distributed Ledger

A blockchain is a decentralized network of computers (nodes), each of which maintains a copy of the entire blockchain ledger. There is no central authority or single point of control. This distributed ledger ensures redundancy and makes the system resilient to failures.


The fundamental building block of a blockchain is a transaction. Transactions represent the exchange of assets or information between participants in the network. Each transaction is cryptographically signed by the sender to verify its authenticity.


Transactions are grouped together into blocks. These blocks contain a set of transactions, a timestamp, and a reference to the previous block, forming a chain of blocks (hence the name "blockchain"). The previous block reference ensures the chronological order of transactions.

Consensus Mechanism

To validate and agree on the contents of the blockchain, nodes in the network use a consensus mechanism. The two most common consensus mechanisms are:

(a) Proof of Work (PoW)

Nodes (miners) compete to solve complex mathematical puzzles. The first one to solve it gets the right to add a new block of transactions to the blockchain. PoW is energy-intensive and used by cryptocurrencies like Bitcoin.

(b) Proof of Stake (PoS)

Validators are chosen to create new blocks based on the amount of cryptocurrency they hold and are willing to "stake" as collateral. PoS is more energy-efficient and used by blockchains like Ethereum 2.0.

Mining (PoW)

In PoW blockchains like Bitcoin, miners compete to solve cryptographic puzzles. When a miner successfully solves a puzzle, they propose a new block of transactions. Other nodes in the network verify the solution, and if it's correct, they add the new block to their copy of the blockchain.

Consensus and Validation (PoS)

In PoS blockchains, validators are selected to create new blocks based on their stake and other factors. Validators propose blocks, and other validators verify and confirm the validity of the proposed blocks.

Security and Immutability

Once a block is added to the blockchain, altering or deleting any information within it becomes nearly impossible due to the cryptographic hash functions used. Changing data in one block would require changing it in all subsequent blocks, which is computationally infeasible. This property ensures the security and immutability of the blockchain.

Public and Private Keys

Participants in the network have a pair of cryptographic keys—a public key for receiving assets or information and a private key for signing transactions. The private key must be kept secret, as it provides control over a user's assets on the blockchain.

Decentralized Applications (DApps)

Blockchain technology supports the development of decentralized applications (DApps) that can interact with the blockchain. DApps can execute smart contracts, which are self-executing contracts with predefined rules written in code.

Transactions and Smart Contracts Execution

When a transaction or smart contract is initiated, it is broadcast to the network, validated, and added to a pending pool. Miners or validators include these transactions in a new block, and once the block is added to the blockchain, the transaction or contract is considered executed.

This simplified overview provides a high-level understanding of how blockchain technology works. It's important to note that there are many different blockchain implementations with unique features and variations in how they operate. The specific technical details can vary significantly between different blockchain projects.