Here's a simplified explanation of how blockchain works:
- Decentralized network: A network of computers (nodes) is established, each with a copy of the blockchain.
- Transactions: When a new transaction is made, it's broadcast to the network of nodes.
- Verification: Each node verifies the transaction using complex algorithms and cryptography.
- Block creation: A group of verified transactions is combined into a "block" and added to the blockchain.
- Chain: Each block is linked to the previous block through a unique code, creating a chain of blocks (hence the name "blockchain").
- Consensus: Nodes on the network agree on the new block, ensuring that everyone has the same version of the blockchain.