How Blockchain Works?
Step 1: Transaction
Party A & Party B have decided they will exchange a digital asset, such as currency or deeds to a property, a birth certificate. They then initiate the transaction.
Step 2: Block
The transaction is packaged with other pending transactions thereby creating a “block”. The block is sent to the blockchain system’s network or participating computers.
Step 3: Verification
The participating computers (called “miners” in the bitcoin Blockchain) evaluate the transactions and through mathematical calculations determine whether they are valid, based on agreed-upon rules. When “consensus” has been achieved, typically among 51% of participating computers, the transactions are considered verified.
Step 4: Hash
Each verified block of transactions is time-stamped with a cryptographic hash.
Each block also contains a nonce & reference to the previous block’s hash, thus creating a “chain” of records that cannot be falsified except by convincing participating computers that the tampered data in one block and in all prior blocks is true. Such a feat is considered impossible.
Step 5: Execution
The unit of value moves from the account of party A to the account of party B.