How Does a Blockchain Work?

A blockchain is a ledger, a list of transactions, that is copied across thousands of computers and organised so that once something is written, changing it is extremely hard. It solves a specific problem: how can strangers who don’t trust each other agree on a single record of who owns what, without appointing anyone to be in charge?

The answer has three parts: blocks, hashes, and consensus.

1. Transactions are grouped into blocks

When you send crypto, your wallet broadcasts a signed message to the network: “move this amount from my address to that address.” Computers running the network’s software (called nodes) check the signature and check that the coins haven’t already been spent.

Valid transactions wait in a queue. Periodically, one participant bundles a batch of them into a block and proposes adding it to the ledger. On Bitcoin, a new block is added roughly every 10 minutes. On Ethereum, a slot for a new block comes up every 12 seconds.

2. Each block is locked to the one before it

A hash function takes any input and produces a fixed-length fingerprint. Change one character of the input and the fingerprint changes completely and unpredictably. Every block contains the hash of the block before it.

That creates the chain:

• Block 100 contains the fingerprint of block 99.
• Block 101 contains the fingerprint of block 100.
• And so on, back to the very first block.

If someone edited a transaction in block 99, its fingerprint would change. Block 100 would no longer match, nor would 101, nor anything after. Every honest node would immediately see the tampered copy as invalid. To fake history, an attacker would have to rebuild every block from the edit onward, and do it faster than the rest of the network keeps adding new ones.

3. Consensus decides who adds the next block

If anyone could add blocks freely, people would add conflicting ones. So each blockchain has a consensus mechanism: a rule for choosing who gets to propose the next block, designed so that cheating costs more than it could earn.

The two main approaches are:

• Proof of work (Bitcoin): participants called miners compete to solve a computational puzzle. Winning requires spending real electricity, so rewriting history would require outspending the whole honest network. See How Bitcoin Mining Works.
• Proof of stake (Ethereum since 2022): participants called validators lock up coins as collateral. If they break the rules, part of that collateral can be destroyed. See Proof of Stake Explained.

Why “decentralised” matters, and its limits

Because every node checks every block against the same rules, no single company can freeze your account, print extra coins outside the rules, or edit the record. That is the core promise.

The promise has limits worth knowing:

• Decentralisation varies enormously. Bitcoin and Ethereum have many thousands of independent nodes. Many smaller networks are run by a handful of insiders, which makes them closer to a company database with extra steps.
• The ledger is only as accurate as its inputs. A blockchain can prove that a transaction followed the rules. It cannot prove that the sender wasn’t tricked into making it.
• Public means public. Every transaction stays visible forever.

A worked picture

Imagine a shared notebook kept by a whole town. Every page is numbered and stamped with a seal made from the contents of the previous page. Anyone can keep a copy. To add a page you must win a lottery (proof of work) or put up a deposit you lose if you lie (proof of stake). Tearing out or rewriting an old page breaks every seal after it, and everyone else’s copy shows the forgery.

That notebook is a blockchain.

Next: How Bitcoin Mining Works