What a blockchain actually is

A shared record

A blockchain is a ledger: a record of who sent what to whom. What makes it different from a bank’s ledger is who keeps it. Instead of one company, thousands of independent computers, called nodes, each hold a full copy and check every new transaction against the same rules.

Transactions are grouped into blocks. Each block contains a fingerprint, called a hash, of the block before it. That is the chain: every block points back to its predecessor, all the way to the first one.

Why it is hard to change

Change one old transaction and that block’s hash changes. The next block no longer points to it, and neither does any block after that. To rewrite history, you would have to rebuild every later block and get the rest of the network to accept your version over the one it already has.

The network agrees on the valid version through a consensus mechanism.

• Proof of work (used by Bitcoin): computers called miners compete to solve a costly puzzle for the right to add the next block. Rewriting history means redoing that work faster than the rest of the network combined.
• Proof of stake (used by Ethereum since 2022): validators lock up coins as collateral for the right to add blocks. Cheating can cost them that collateral.

On a large network, both make rewriting history far more expensive than it could be worth. On small networks, it has happened.

What is actually on-chain

• Transactions and balances, tied to addresses: long strings of letters and numbers, not names.
• Smart contracts on some chains: programs that run automatically when their conditions are met.

What is not on-chain: your name, your exchange account, or the price of the coin in dollars. Prices come from trading on exchanges.

Common myths

• “It’s anonymous.” Public blockchains are the opposite: every transaction is visible to everyone, permanently. Addresses are not names, but they can often be linked to people. Pseudonymous is more accurate.
• “Your coins are stored in your wallet.” The balance is recorded on the blockchain. A wallet holds the keys that let you move it. See wallets, keys and seed phrases.
• “On the blockchain means true.” A blockchain records what was submitted under its rules. It cannot check whether a project’s promises are real.
• “Blockchain is one thing.” Bitcoin, Ethereum and hundreds of other networks have different rules, trade-offs and degrees of decentralisation.