How Claude Code Works

Claude Code runs on an "agentic" loop that gathers context, takes action, and verifies results. In this video, we break down the loop, the context window, tools, and permission modes so that Claude Code doesn't feel like a "magic box". Take the full course: claude.com/courses

May 14, 20262mWatch on YouTube ↗

WHAT IT’S REALLY ABOUT

Claude Code uses an agentic loop to act in terminals

Claude Code follows an agentic loop: gather context, take tool-driven actions, and verify results against the original prompt.
The system alternates between model output (text or tool calls) and executable actions like editing files or running commands in the terminal.
Claude Code manages a finite context window and will compact/summarize prior conversation and outputs when limits are reached.
Tools (e.g., read-file, web search) are central, enabling Claude Code to decide when to execute operations rather than only chat.
Configurable permission modes balance safety and speed, with cautions about risks when allowing automatic command execution.

IDEAS WORTH REMEMBERING

5 ideas

Claude Code is designed to complete tasks, not just answer questions.

It repeatedly gathers context, performs concrete actions (like edits/commands), and verifies outcomes until the prompt’s goal is met.

Verification is a core step, not an afterthought.

After acting, Claude Code checks whether results are correct and aligned with the prompt, and reruns the loop if they aren’t.

Tooling is what makes it “agentic.”

Unlike typical chat-only assistants, Claude Code can invoke tools to read files, search, or execute commands to advance toward completion.

Context management enables longer workflows but requires summarization tradeoffs.

When the context window fills, Claude Code compacts conversation and outputs—keeping essentials while summarizing or removing less critical detail.

Permission modes are a safety-speed dial.

Default mode requires explicit approval for edits/commands, while modes like auto-accept edits or plan (read-only) change how much autonomy Claude Code has.

WORDS WORTH SAVING

5 quotes

Claude Code is best explained through the agentic loop.

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You enter a prompt into Claude Code. Claude Code will then gather context required to complete your prompt.

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Finally, it verifies those results and determines if they achieve what your prompt set out to do in the first place.

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Tools are the backbone of how agents work.

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It's worth being cautious when skipping permissions. Giving Claude Code free reign to run commands means a mistake could be harder to catch before it even happens.

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Agentic loop (prompt → context → act → verify → repeat)Tool calls vs. plain text responsesContext window limits and compaction/summarizationSemantic search for tool selectionPermission modes (default, auto-accept edits, plan/read-only)Terminal-based codebase interactionHuman steering and interruption during execution

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