Bitcoin uses SHA-256 encryption for both its Proof-of-Work (PoW) system and transaction verification. The security of the bitcoin protocol lies in one of its fundamental characteristics, the transaction blockchain.
The blockchain is basically a chain of multiple "blocks" containing transaction history. The blockchain starts with the initial block, known as the genesis block. Transactions and solved hashes add new blocks after this genesis block, creating a blockchain.
Within the bitcoin protocol, the blockchain that has seen the most work put into it is considered to be the best blockchain and the one that the entire protocol refers to when verifying transactions. Bitcoins are considered spent once a transaction has been verified.
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How do blockchains work?
To ensure that the network’s transaction history is not manipulated by anyone, the community behind the network has to agree on a common “reality”.
In a blockchain, transactions are stored in blocks, with each newly generated block referring to the block before it with a unique identifying number called a “hash.” These blocks constitute a chain, hence the name “blockchain”. This chain continues on indefinitely.