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How
Blockchain
Works

Part 5

Understanding the
fundamentals of blockchain.

presented by

Lucky Star & Digital Altar

Understanding how blockchain works is essential for anyone interested in digital
currencies or decentralized technologies. Blockchain is more than just a buzzword;
it's the foundation of web3, cryptocurrencies, and NFTs. Let's dive into the basics.

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At its core, a blockchain is a digital ledger
of transactions that is duplicated and
distributed across the entire network of
computer systems on the blockchain. It's a
transparent and secure system that tracks
every transaction and ensures that data
cannot be tampered with.

What is blockchain?

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Data is stored in blocks. Each block holds
information about multiple transactions,
and once verified by the network, the block
is permanently added to the chain. This
ensures that the data is secure and
immutable.


Data blocks.

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One of the most important aspects of
blockchain is its decentralized nature.
Instead of being controlled by a single
entity, the blockchain is maintained by a
global network of users. This ensures that
no single person or organization has
control over the entire system.

Decentralization.

Consensus Mechanisms

Before a block can be added to the chain, the network must agree that the block is valid.
This process is called
consensus. It ensures that all participants in the network agree on
the state of the blockchain, preventing fraud and ensuring security.


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Proof of Work

Some blockchains, such as Bitcoin, use a
consensus mechanism called Proof of
Work (PoW). In this system,
miners solve
complex problems using significant
computing power to add blocks to the
blockchain. This process ensures security
but requires a large amount of energy.


Proof of Stake

Other blockchains, such as Ethereum,
use a different consensus mechanism
called Proof of Stake (PoS). In PoS,
validators are chosen based on the
amount of cryptocurrency they have
"staked". This system is more energy-
efficient than PoW and allows faster
transactions.

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Once a block is added to the blockchain,
it cannot be changed. The data in each
block is permanent and unchangeable,
ensuring trust and preventing tampering.
This
immutability is one of the key
features of blockchain technology.

Immutable records.

Blockchain is a backbone of digital trust and transparency. By securing transactions in immutable
blocks and operating in a decentralized manner, blockchain ensures the trust and security of a
decentralized network, making it the foundation of web3 technologies.

The backbone of a decentralized world.

Lucky Star

x

Digital Altar

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This piece was written by Lucky Star, with technical guidance and editing by Digital Altar.
If you enjoyed this knowledge share, feel free to explore my
website and follow me on
social media for additional content.

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see if you’re ready to dive into the
next part of our series:
Understanding Blockchain Layers.

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