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Ethereum: a simple explanation of how the blockchain works
Imagine being at a party and you want to give interesting things to your friends as a thank you for coming. You could simply give them money or physical gifts, but it’s not very efficient, right? And if everyone had a copy of the list of what everyone wants, so they can all agree on who gets what?
This is basically what Blockchain is: a master digital book (a list) that keeps track of transactions (what people want and give each other). But instead of using in cash or physical gifts, it uses special computer codes called “blockchain” to record everything.
Here’s how it works:
1. A group of people agrees on the rules
A group of individuals, called miners, works together to create a new “block” (a collection of transactions). They use powerful computers to solve complex mathematics problems, which help to verify that the block is valid. This guarantees that only one person can add new blocks to the master book at a time.
2. A transaction is recorded in the blockchain
The miner collects a group of transactions from all the people who participated in the part (that is, they want to send something or receive something). Then they combine these transactions in a single block and add them to the Mastro book.
3. The block is verified by miners
The miner’s computers control the block for any errors or duplicates, ensuring that the new transaction is valid. If everything seems good, the miner transmits the new block on the net.
4. Everyone can see the Blockcha
Once a new block to the Mastro book is added, it is visible to all participants. This allows anyone to trust the fact that everyone has an accurate copy of the list (blockchain).
5. The miners receive prizes for their work
The miners are rewarded with the newly coined Ethereum token (Ether) to solve the complex mathematics problems and check the blocks. The more blocks they solve, the more ether they earn!
How it works in practice:
- When sending a little Ethereum to someone, it is added to a new block on the blockchain.
- The blockchain is then transmitted to the entire miners.
- The miners verify the transaction and add it to their copy of the book Mastro (Blockchain).
- Everyone can see the updated blockchain, which guarantees that everyone has an accurate list.
In simple terms, Ethereum uses Blockchain technology to create a safe, transparent and tampering record book for all transactions. The decentralized nature of the blockchain allows peer-to-peer transactions without the need for intermediaries such as banks or governments.
While this explanation may have taken time to grab, I hope it has helped you understand how Ethereum works!
