What is a blockchain? How a shared ledger works

A blockchain is a record of transactions that many independent computers keep together, so no single company is in charge of the books. Here is how it works, in plain English, and what it can and cannot do.

Start with a ledger

A ledger is simply a list of who paid whom. Your bank statement is one. So is the notebook a group of roommates might use to track who bought groceries.

The roommate notebook works because everyone trusts the person holding it. Now imagine a notebook shared by millions of strangers who do not trust each other. That is the problem a blockchain solves.

Blocks and the chain

New transactions are bundled into pages called blocks. On Bitcoin, a new block arrives roughly every 10 minutes. On Ethereum, a slot for a new block comes every 12 seconds.

Each block carries a short digital fingerprint of the block before it, called a hash. Change even one character in an old block and its fingerprint changes completely, which breaks the link to every block after it. That linked sequence is the "chain."

Picture a stack of numbered receipts where each receipt is stamped with a code made from the one beneath it. Pull one out and alter it, and every stamp above no longer matches.

A payment's journey, step by step

1. You tell your wallet to send coins, and it signs the request with your secret key.
2. The signed transaction is broadcast to the network and waits in line with others.
3. Computers on the network check that the signature is valid and the coins have not already been spent.
4. The transaction is packed into a new block, which gets linked to the chain.
5. Every new block added on top counts as another "confirmation," making the payment harder to undo.

Nodes: thousands of copies

A node is a computer that runs the network's software and keeps its own full copy of the ledger. Nodes check every new transaction and block against the rules and reject anything that breaks them.

Because there are so many independent copies, there is no single server to switch off or quietly edit. If one node lies, the others simply ignore it.

Consensus: agreeing on the next page

With thousands of copies, the network needs a fair way to decide who writes the next block. That method is called consensus. The two most common types work very differently.

Proof of work

In proof of work, computers called miners race to solve a hard numerical puzzle. The winner adds the next block and earns newly created coins plus fees. This is called mining.

The puzzle costs real electricity and equipment. To rewrite history, an attacker would need to out-compute the rest of the network, which on a large chain like Bitcoin would be enormously expensive.

Proof of stake

In proof of stake, participants called validators lock up the network's coins as a security deposit. The protocol picks validators to propose and confirm blocks. Cheat, and part of your deposit can be destroyed.

Ethereum switched from proof of work to proof of stake in September 2022, an upgrade known as the Merge. According to ethereum.org, it cut the network's energy use by about 99.95%.

Public vs permissioned blockchains

A public (or permissionless) blockchain lets anyone read it, send transactions and run a node. Bitcoin and Ethereum are public.

A permissioned blockchain only admits approved members with known identities. Businesses use frameworks like Hyperledger Fabric to share records with partners without opening them to the world. These systems trade openness for privacy and control, and they usually have no tradable coin.

What "immutable" really means, and doesn't

You will often hear that blockchains are immutable, meaning they cannot be changed. That is mostly true, with important fine print.

• It does mean that once a transaction is buried under many later blocks on a large network, rewriting it is impractical. That is why payments are treated as final.
• It does not mean the data is true. If someone records false information, the blockchain stores the falsehood just as permanently.
• It does not mean every chain is equally secure. Smaller proof-of-work networks can be attacked by someone who briefly controls most of the mining power. Ethereum Classic suffered several of these "51% attacks" in 2019 and 2020.
• It does not mean your funds are safe. Most losses people suffer come from hacked apps, phishing and stolen keys, not from the blockchain itself being rewritten.

Real uses beyond money

Blockchains are best when several parties need one shared record and do not want to rely on a single gatekeeper. Uses already running include:

• Tokenized funds. In March 2024, BlackRock launched BUIDL, a tokenized fund issued on the public Ethereum blockchain. See real-world assets.
• Stablecoins. Dollar tokens that settle on public blockchains around the clock.
• Apps run by code. Smart contracts run lending, trading and other services on networks like Ethereum.
• Business record sharing. Permissioned ledgers for tracking shared records between companies.

Not every problem needs a blockchain. If one trusted organization already keeps the records well, an ordinary database is usually cheaper and faster.

See it for yourself with a block explorer

A block explorer is a search engine for a public blockchain. Paste in a transaction ID or address and you can see amounts, timestamps and how many blocks have confirmed it.

Explorers are handy for checking that a payment arrived. They are also a reminder that public blockchains are transparent: anyone can look up an address's full history.

Where to go next

You have seen how a blockchain keeps a shared record honest. Next, meet the network that started it all in what is Bitcoin, where mining, the halving and the 21 million cap come together. If you skipped the first lesson, what is cryptocurrency sets the scene, and the full path lives in our free Crypto Foundations course.

Updated October 4, 2026 by The Crypto Guide editorial team. Educational content, not financial, legal or tax advice. Spot an error? Request a correction.