How do Bitcoin and blockchain work? (in 2 minutes and 30 seconds)

When you think of blockchains, the first thing that comes to mind is probably Bitcoin. Blockchain technology underpins Bitcoin and all cryptocurrencies, and is responsible for its security and accuracy. But how does it work?

What’s a blockchain?

A blockchain is a public record of transactions — or payments. Being public means that everyone can see all the transactions that have ever taken place. Transactions are added to the blockchain in a chronological order, and are verified by a network of voluntary participants.

This verification is what makes blockchain so secure. It’s impossible to tamper with or change the transactions on the blockchain, as this would require approval from all the participants in the network. If someone tries to spend the same Bitcoin twice, for example, everyone on the network would be able to see that this has happened, and the transaction would be rejected.

Blockchains are self-reliant

Blockchains are decentralized: participants don’t rely on a central authority, like a bank or government, to tell them which payment is valid and which one is fraudulent. Each participant has their own copy of the blockchain. Using a fixed set of rules, participants can determine by themselves if a new transaction is valid or not.

Every 10 minutes on average, a new batch of transactions, called a block, is added to the Bitcoin blockchain, like a new page added to a book. All participants then verify that this new block only contains valid transactions. If a fraudulent transaction is detected, participants will reject the whole block.

What are miners?

A subset of participants, called the miners, are responsible for gathering the new payments that are sent to the network and packaging them into blocks. Miners compete with each other in a mathematical game (called Proof-of-Work) and the winner gets to add its block to the blockchain and receives a reward paid in bitcoins.

This financial mechanism incentivizes the miners to do their work honestly (if not, their block will be rejected and they will lose their reward) and to secure the network.