The blockchain is a distributed, public database. As the name suggests, blocks of data are recorded chronologically and strung together. The various nodes (computers in the network) are equal to each other and all have an identical copy of the blockchain. They check new blocks for accuracy. Only if there is a consensus and the majority of nodes accept a block is it added to the blockchain.
A block consists of three essential components: the data, the hash of the previous block, and the hash of the current block. In Bitcoin, the data consists of transactions, i.e. from where was which amount transferred where. But what is a hash? A hash is the digital fingerprint of a block and is calculated from all the information contained in the block using a mathematical process. Bitcoin uses the SHA-256 hash algorithm for this purpose. This alphanumeric value is used to concatenate the individual blocks. A block always contains the hash of the previous block. In a very simplified way it looks like this AB-BC-CD-DE-EF
If someone now tries to manipulate a transaction in block BC, this generates a new hash for this block. The hash of the block is then no longer BC but becomes BW. This triggers a chain reaction whereby all subsequent blocks must also be recalculated. This then looks like this: AB-BW-WX-XY-YZ.
Since the calculation of a hash is an easy task for computers, the degree of difficulty (so-called "mining difficulty") is artificially increased. In Bitcoin, a hash must start with a certain number of zeros and may not exceed a certain value. The difficulty is continuously determined and adjusted by the target . This is to keep the processing time for mining a new block constant at around 10 minutes. In order to be able to generate a valid hash, there is the nonce (abbreviation: number only used once), which is included in the calculation process of the hash. The "miners" try to generate the correct hash by constantly changing this nonce. This process is very energy intensive and requires a lot of computing power. This makes it practically impossible to change once confirmed blocks and their transactions afterwards.
This is what a valid Bitcoin hash looks like: 00000000000000000657a7fdaeec04752103e11f22ce492d63413a007726c8
To illustrate, let's take a memory game with the numbers 1 to 1,000. Beforehand, we determine under which value the pair we are looking for must be. The lower this value is, the more difficult it is to find a correct pair. If, for example, 250 is defined as the target, you will have to play longer to find a pair that is below this value and thus meets the requirement. However, if you find one of the pairs you are looking for, your fellow players will immediately recognize that the solution is correct. This procedure is called "Proof of Work".
The successful miner is then allowed to add the block to the blockchain and receives a reward(Block Reward) of currently 6.25 Bitcoin as well as the transaction fees for the mined block. All other miners go away empty-handed. This process is repeated for each block and is called "mining".
The advantages of the blockchain are clear. Decentralized storage protects data from failures and attacks on individual computers. In addition, it is virtually impossible to change or manipulate blocks once they have been confirmed. Intermediaries, in Bitcoin's case a bank, are no longer needed. It is a "trustless system". Blockchain technology is not only limited to payment transactions, but can be extended to practically every area of our everyday lives where data needs to be exchanged.