> For the complete documentation index, see [llms.txt](https://doc.d1ce.com/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://doc.d1ce.com/blog-en/how-does-blockchain-work.md).
# How Does Blockchain Work?
Blockchains function similarly to databases or spreadsheets, allowing the entry and storage of data in a digital ledger. However, the structure and access methods for data in a blockchain differ significantly from those in traditional databases.
When you perform an action on the blockchain, such as transferring cryptocurrency, scripts automatically log the transaction data into a block. The block's size and the processes for verifying and recording data depend on the specific blockchain network in use, although all blockchains share fundamental operational principles.
The entire blockchain is distributed across all computers in the network, requiring that each copy be identical for it to be considered valid. This decentralization ensures that transaction records are accurate without relying on any single company or service to manage the network.
On D1CE, certain cryptocurrencies can be transferred across multiple blockchain networks, so it's essential to verify whether the network you choose supports the cryptocurrency you wish to send.
### **Bitcoin Network**
When you send or receive Bitcoin, your transaction details are transmitted to the memory pool, which is a network of peer-to-peer computers distributed globally. Mining computers then work to solve cryptographic equations to verify the transaction and log the details in a block. Once the transaction is confirmed, it is finalized, and the data becomes accessible across all network copies.
Each Bitcoin block holds 4MB of data, and when a block reaches its capacity, the data is processed through a cryptographic hash function to generate a block header. This header from the previous block is then used to form a chain of blocks. The mining computers participating in this process earn rewards in the form of newly mined Bitcoin. This mechanism is referred to as Proof of Work (PoW).
### **Ethereum Network**
While the Ethereum network has similarities to other cryptocurrency blockchains like Bitcoin, it also features significant differences. The primary distinction is that it employs Proof of Stake (PoS) instead of Proof of Work.
In the Ethereum network, computers can stake ETH to become validators. When a transaction requires verification, one validator is selected at random. This approach allows for quick transaction processing without the heavy reliance on computing power and energy consumption associated with mining.
---
# Agent Instructions
This documentation is published with GitBook. GitBook is the documentation platform designed so that both humans and AI agents can read, navigate, and reason over technical content effectively. Learn more at gitbook.com.
## Querying This Documentation
If you need additional information that is not directly available in this page, you can query the documentation dynamically by asking a question.
Perform an HTTP GET request on the current page URL with the `ask` query parameter, and the optional `goal` query parameter:
```
GET https://doc.d1ce.com/blog-en/how-does-blockchain-work.md?ask=&goal=
```
`ask` is the immediate question: it should be specific, self-contained, and written in natural language.
`goal` is optional and describes the broader end goal you are ultimately trying to accomplish on behalf of the user. GitBook uses it to tailor the answer towards what is most useful for that goal.
The response will contain a direct answer to the question and relevant excerpts and sources from the documentation.
Use this mechanism when the answer is not explicitly present in the current page, you need clarification or additional context, or you want to retrieve related documentation sections.