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Day 2 – How Blockchain Works



Congratulations on completing Day 1! Now that you know what cryptocurrency is, it’s time to understand the technology that makes it possible – Blockchain.

Without understanding how blockchain works, you won't fully grasp why cryptocurrencies are secure, transparent, and decentralized.

🔹 What is a Blockchain?

A blockchain is a digital ledger or record book that keeps track of every transaction made using cryptocurrency. Imagine a notebook where every transaction is written down and shared with thousands of people around the world.

Every page in this notebook is called a block, and the pages are connected in order to form a chain – hence the name blockchain.

🔹 Key Features of Blockchain

  1. Transparency
    Anyone can see the transaction records. You don’t need permission from a bank or authority.

  2. Security
    Transactions are encrypted and cannot be easily tampered with. Once a transaction is recorded, it’s permanent.

  3. Decentralization
    No central authority controls the data. Instead, it’s spread across thousands of computers, making it almost impossible to hack.

  4. Immutability
    Once a transaction is added to the blockchain, it cannot be deleted or altered.

🔹 How Transactions Are Verified

Whenever someone sends cryptocurrency to another person, the transaction must be confirmed.

This happens through two methods depending on the blockchain:

  1. Proof of Work (PoW):
    Used by Bitcoin. Powerful computers solve complex mathematical problems to validate transactions.

  2. Proof of Stake (PoS):
    Used by Ethereum and others. Validators are chosen based on how much cryptocurrency they hold.

🔹 Simple Example

Let’s say Priya sends 0.5 ETH to her friend Aman.

  1. She creates the transaction in her wallet.

  2. The transaction is broadcast to the network.

  3. Miners or validators check that she actually has 0.5 ETH.

  4. The transaction is added to a block.

  5. The block is added to the chain.

  6. The transaction is confirmed, and Aman receives the money.

It’s that simple – but with powerful technology ensuring everything stays secure.

🔹 Why Blockchain Matters for Traders

  • You can trust the system even without intermediaries like banks.

  • Fraud is hard because everyone verifies transactions.

  • Smart contracts allow automatic agreements without lawyers.

📝 Example Story

Nisha wants to buy NFTs (digital art tokens). She uses a platform that runs on the Ethereum blockchain.
Because the transactions are secure and transparent, she doesn’t worry about fraud. Every transfer is recorded on the blockchain for everyone to see.

✅ Day 2 Task

  1. Write down in your own words what blockchain is and how it works.

  2. Research the difference between Proof of Work and Proof of Stake (just one paragraph each).

  3. Watch a short video (5–7 minutes) explaining blockchain technology.

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