Basics
What is blockchain?
Blockchain is the technology behind Bitcoin, Ethereum and thousands of other crypto projects. At its core, it is a way of recording shared, tamper-resistant data without any single party being in control. Below we explain how it works and why it matters.
A shared ledger
A blockchain is essentially a digital ledger maintained by thousands of computers at once, rather than by a single bank or authority. Every participant in the network holds a copy of the same transaction history.
Because everyone sees the same data, and new entries must be verified by the network, it becomes practically impossible for one party to alter the records alone. That is the fundamental difference from a traditional database run by a single organisation.
Blocks and chains
Transactions are grouped into 'blocks'. Once a block is full, it is cryptographically linked to the previous block. Hence the name blockchain. That link means an earlier block cannot be quietly edited without breaking every block that follows.
Each block contains a timestamp, a list of transactions and a unique digital fingerprint (hash) of the previous block. Change even a single digit in an old block and the whole chain of hashes afterwards stops matching, exposing the tampering immediately.
Consensus: how the network agrees
Since no one is in charge, the network needs a way to agree on which transactions are valid. This is called consensus. Bitcoin uses 'proof of work', where computers spend computing power to earn the right to add new blocks.
Ethereum and many other networks now use 'proof of stake', where participants lock up their own crypto as collateral to validate blocks. This uses considerably less energy than proof of work.
- Proof of work: security through computing power (e.g. Bitcoin)
- Proof of stake: security through staked capital (e.g. Ethereum)
What makes blockchain valuable?
The key feature is that trust is organised through code and mathematics rather than an institution. This enables cross-border transfers of value without a bank or clearing house sitting in between.
A blockchain is also transparent: anyone can inspect transactions on public networks such as Bitcoin and Ethereum using a blockchain explorer, even though user identities are not usually directly visible.
Limitations and risks
Blockchain is no miracle cure. Public networks are often slower and more expensive per transaction than centralised systems, although so-called layer-2 solutions are improving this. Bugs in smart contracts can also lead to irreversible losses.
A blockchain itself is neutral: it can host fraudulent tokens just as easily as legitimate projects. The technology alone does not guarantee that a project is valuable or safe to invest in.
Uses beyond crypto payments
Beyond digital currency, blockchain is used to record ownership of digital items (NFTs), to power decentralised finance (DeFi) services, and in experiments around supply-chain traceability.
Within the European Union, many of these uses have fallen under the MiCA regulation since 2024, which sets rules for crypto-asset service providers and token issuers to better protect consumers.
Frequently asked questions
Is blockchain the same thing as Bitcoin?
No. Bitcoin is one application of blockchain technology, namely digital money. Blockchain itself is the underlying technology also used by Ethereum and many other networks for a wide range of purposes.
Can a blockchain be hacked?
Large, established networks such as Bitcoin and Ethereum have not been successfully hacked at the protocol level thanks to their broad, decentralised network of validators. Individual applications, exchanges and smart contracts, however, are regularly targeted.
Why does a blockchain transaction sometimes cost money?
Network participants who process and secure transactions are rewarded with a fee. These fees vary significantly by network and by how busy it is at the moment you send a transaction.
Is all information on a blockchain public?
On public blockchains such as Bitcoin and Ethereum, transactions are indeed visible to anyone, though no name is attached to an address. Private or permissioned blockchains restrict access to authorised parties.
Do I need deep technical knowledge to use blockchain?
No, most users only need a wallet app and a regulated trading platform. You don't need to understand the underlying technology to buy, send or hold crypto, though basic knowledge helps you judge risks better.
Read next
What is Bitcoin?
Bitcoin explained: how it works, why it is scarce, what sets it apart from ordinary money, and the risks buyers should understand.
What is Ethereum?
Ethereum explained: how the network works, what smart contracts are, why ether is needed, and the risks users should understand.
Holding your own crypto
How to set up a self-custody wallet, store a seed phrase safely and decide when a hardware wallet is worth it. Practical guide, not advice.