Blockchain technology is a decentralized digital ledger that records transactions across a network of computers. It is the underlying technology for many digital currencies, such as Bitcoin, but it has many other potential uses as well. In this article, we will explore how blockchain works and the key concepts that make it possible.

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Distributed ledger

In traditional systems, a single entity controls the ledger and has the power to add, delete, or modify records. However, in a decentralized system, the ledger is spread out across the network and each participant has a copy of the ledger. This creates a more secure system because there is no central point of failure. If one computer on the network goes down, the network can still function because the other computers still have a copy of the ledger.

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Block

A block is a collection of transactions that are grouped together and added to the blockchain. Each block contains a unique code called a “hash” that links it to the previous block. This creates a chain of blocks, hence the name “blockchain”. The blocks are added to the blockchain in a linear, chronological order and once a block is added, the information it contains cannot be altered.

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Consensus

In a decentralized system, there is no central authority to validate transactions. Instead, the network uses a consensus algorithm to ensure that the information on the blockchain is accurate. One of the most commonly used consensus algorithm is called “Proof-of-Work”. This algorithm requires network participants (called “miners”) to solve complex mathematical problems in order to validate transactions and add them to the blockchain. The more modern consensus algorithm is called "Proof-of-Stake".

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Decentralization

In a decentralized system, there is no central point of control. Instead, the network is made up of a large number of nodes, each of which has a copy of the blockchain. This creates a highly secure system because there is no central point of failure. If one node goes down, the network can still function because the other nodes still have a copy of the blockchain.

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Immutability

Once a block is added to the blockchain, the information it contains cannot be altered. This creates a tamper-proof record of all transactions that have taken place on the blockchain.

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In conclusion, blockchain technology is a revolutionary technology that has the potential to change the way we conduct transactions and manage data. Its key concepts of distributed ledger, blocks, consensus, decentralization and immutability make it secure, transparent and tamper-proof. As the technology develops and becomes more widely adopted, it has the potential to greatly impact the way we live and work. It's a complex technology, but understanding how it works and its key concepts will help you to appreciate its potential and its limitations.

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