What is a blockchain?

A blockchain is a system for organizing and verifying records. Data is grouped into blocks, blocks refer to one another through hashes, and network nodes check which records follow the rules. Participants can verify the history without relying on a single keeper of the ledger.¹²

A simple analogy

Imagine four people keeping track of shared expenses. If only one person keeps the ledger, everyone else must trust that person to record every payment. If several people keep and check the records, they still need rules for deciding which version is valid and what to do if someone changes an old entry.

This explains the value of independent verification. On a public blockchain, users do not all vote on each transaction, and different kinds of nodes do not all store or check the same data.

How it works

A typical Bitcoin payment goes through these steps:

1. A wallet constructs and signs the transaction, then broadcasts it.
2. Nodes check that the transaction follows the rules, including its signatures and which funds it can spend.
3. Miners assemble transactions into candidate blocks. Other nodes still check the resulting block independently.
4. The network applies its consensus rules to select a valid history. As more blocks build on a record, rewriting it usually becomes harder.¹

A hash is a fixed-length value calculated from data. Each block's reference to the previous block connects their histories. Editing old data changes its hash, so changing one copy of the ledger does not make other nodes accept a new history.¹

Blockchains use different rules to produce blocks. Ethereum uses proof of stake. Its confirmation process should not be inferred from Bitcoin's mining process.²

An example

When Lin sends BTC to Wang, the Bitcoin blockchain records the transaction and the conditions for spending its outputs. A wallet displays the resulting status and balance. Wang can verify the transaction using the network's rules instead of relying solely on a screenshot from Lin.

Common distinctions

• Blockchain and Bitcoin. A blockchain is a way to organize records. Bitcoin is a particular network and asset that uses it.
• Blockchain and distributed ledger. A distributed ledger is the broader category.
• A recorded claim and a true claim. A blockchain can record a product description without proving that the description is accurate.

Limits and risks

Resistance to rewriting history depends on consensus rules, the network and the cost of attacking it. A chain reorganization is possible, so a single confirmation is not enough in every situation. Issuing a separate refund is different from editing the original on-chain transaction.

A blockchain does not guarantee application or smart contract security. Shared verification, coordination and recordkeeping have costs. A conventional database is suitable for many systems with a clearly responsible operator.