How does blockchain technology function?

Blockchain technology operates as a decentralized ledger that securely records transactions across multiple computers. This fundamental characteristic allows for a transparent and tamper-proof record of data, where entries are linked in a chain of blocks. Each block contains a number of transactions, and once a block is filled, it is cryptographically secured and linked to the previous block, creating an immutable chain.

The decentralization aspect is crucial because it eliminates the need for a central authority or intermediary, reducing the risk of manipulation and increasing trust among participants in the network. Each participant (or node) in the blockchain network has access to the entire ledger, promoting transparency and ensuring that all transactions are verifiable by each participant.

This method of operation enhances security as altering any information in a block would require changing all subsequent blocks, an extremely difficult task due to the cryptographic techniques involved. As a result, blockchain technology is revolutionary in various applications, including cryptocurrency, supply chain management, and smart contracts, by ensuring that data integrity and security are maintained without relying on a central management system.