A chunk is 16x16 block square. Everything that happens above and below that square: all the caves, resources, water, and air in that vertical slice is treated as one “unit” by the game.
From a player’s point of view, a chunk is 16 blocks wide (X), 16 blocks long (Z), and 384 blocks tall (Y) on Minecraft Java Edition.

Minecraft worlds extend up to 30 million blocks in each horizontal direction. Storing that whole thing in memory would be impossible for normal PCs or game servers. Chunks exist so the game can load and process only a small, relevant part of the world at a time.
For Minecraft server hosting, chunks are important because they directly control:
When players explore rapidly (elytra, high-speed horses, teleporting), they force the server to constantly generate and load new chunks, which can cause lag or TPS drops if your config or hardware can’t keep up.
Chunk generation happens the first time a chunk is created. The server runs the world generator, structures, caves, biomes, and so on. This is CPU-heavy, especially in newer versions with more complex terrain. When multiple players fly into unexplored terrain, generation becomes one of the main causes of lag spikes.

Chunk loading is when the server reads already-generated chunks from disk into memory. This is usually faster but can still stutter if the disk is slow or busy.

When players complain that “chunks are loading slowly” or “the world is full of holes,” they’re usually talking about chunk-related performance issues. There are many ways you can optimize to avoid this.
Every point of "view-distance" adds a ring of chunks around each player. That grows the total number of chunks per player a lot. Play around with your view-distance setting inside server.properties file to see what works.
If you’re on Paper or a recent version:
view-distance=8, simulation-distance=5.That keeps the visual world decently large but reduces how many chunks actually tick (mobs, farms, redstone), which is where a lot of CPU time goes.
Slow chunk loading is often actually chunk generation lag. Pre-generate the main play area so most chunks already exist on disk. Use a plugin like Chunky (Paper/Spigot) or similar tools.
Result: When players explore, the server mostly does cheap loading instead of expensive generation.
If you are running a big server consider setting a reasonable world border so the world doesn't expand infinitely or consider limiting flying with elytra or cheats.
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