What Is a Blockchain, and How Does It Work in Bitcoin?

The useful part

A blockchain is a type of distributed database that stores information in a sequence of blocks. In the context of Bitcoin, the blockchain is a public record of confirmed transactions that is maintained and independently verified by network participants. Each block contains a group of valid Bitcoin transactions, along with other data required to connect that block to the existing chain.

How it works

• Because each block refers to the previous block, changing historical data would break the links between blocks.
• When a new block is received, a node independently checks whether it follows Bitcoin's consensus rules.
• This means that the validity of Bitcoin's blockchain does not depend on trusting a single company, government, or database administrator.
• If the underlying data changes, the resulting hash also changes.
• Bitcoin users create transactions that spend existing transaction outputs.

What to take from it

This creates an ordered chain of historical records. Every Bitcoin block contains a reference to the previous block through its block header. Instead, many independent nodes maintain copies of the blockchain and verify new transactions and blocks according to the same protocol rules.

Details worth keeping

This reference is based on a cryptographic hash. The Bitcoin blockchain is not stored on a single central server.