How does a blockchain work?

Blockchain provides a mechanism that enables two parties to exchange value directly and securely over a peer-to-peer network. What makes Blockchain is transformational is the exchange of value occurs directly between the two parties with no intermediaries such as a lawyer, credit card company, bank etc.

Figure 1 depicts the basics of a blockchain transaction flow.

Figure 1: How a blockchain works
  1. Step 1: Person A initiates the transaction to send digital currency to Person B. This could just as easily involve the transfer of records, contracts or any other authorized form of value. 
  2. Step 2: The transaction request ...

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