Physiological dependence occurs because alcohol (ethanol, which is the principal form of alcohol in booze) binds to receptors that normally take a molecule called GABA (gamma aminobutyric acid), which primarily works as a depressant for the central nervous system. GABA is usually produced in a way that balances out a different molecule called glutamate, which primarily works as to excite the central nervous system. When ethanol increases the activity at GABA receptors continuously, the brain becomes accustomed to that artificial influence and decreases its natural production – the balance of GABA and glutamate receptor activity, on average, “appears” balanced to the brain’s normal mechanisms.
Ceasing to consume ethanol leaves the brain with a lower-than-normal amount of GABA receptor activity, and either a normal or increased amount of glutamate production and receptor activity, resulting in over-excitement of the CNS. This can have effects ranging from unpleasant (shakes, confusion, mild anxiety) to very distressing or even life-threatening (alcoholic hallucinosis, delirium tremens, seizures) because the excess glutamate causes the nervous system to be active in ways that it should not normally be.
EDIT: It is also worth mentioning that something very similar happens with other GABAergic drugs such as benzo- and thienodiazepines (e.g. alprazolam, diazepam, etc.). This is why benzo withdrawal can be similarly dangerous.
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