What is blockchain? How it works, explained step by step

A blockchain is a shared record book that thousands of independent computers keep at the same time. Records are grouped into blocks, and every new block carries a fingerprint (a hash) of the one before it, so the blocks form a chain. You can't quietly change an old record: its fingerprint would change, the link to every later block would break, and the rest of the network would reject that version. That is how bitcoin keeps its ledger. As of October 31, 2026, the bitcoin blockchain held 973,946 blocks, and the very first one, written on January 3, 2009, has never been rewritten.

This guide explains blockchain technology step by step: what's inside a block, how mining or staking protects the chain, how public and private blockchains differ, where the technology earns its keep and where the claims get oversold.

What is a blockchain, and where did the idea come from?

The US National Institute of Standards and Technology, in its overview NIST IR 8202 (2018), describes blockchains as tamper-evident and tamper-resistant digital ledgers implemented in a distributed way, usually without a central authority such as a bank, company or government. Users record transactions in a shared ledger, and under normal operation no transaction can be changed once published.

Linking records with hashes predates bitcoin. In 1991 researchers Stuart Haber and W. Scott Stornetta proposed a way to time-stamp digital documents: each new batch of records was tied to the hash of the previous batch. Starting in 1995, the company Surety printed those hashes in the weekend edition of The New York Times so anyone could check the chain (a walkthrough of the scheme). The catch was a central time-stamping server everyone had to trust.

Satoshi Nakamoto's bitcoin whitepaper (2008) cites Haber and Stornetta and removes the trusted server: the network, not a single operator, decides the order of records. The word "blockchain" never appears in the paper, which talks about a chain of blocks and a timestamp server. The term caught on later.

What's inside a block?

Take a real one. Bitcoin block 973,946 was mined on October 31, 2026, at 3:21 AM ET (mempool.space). It contains 6,154 transactions and weighs in at 1.69 MB. On top sits an 80-byte header, with fields defined in the Bitcoin developer reference:

Two fields do the heavy lifting. The previous block hash is the fingerprint of block 973,945's header; as the reference puts it, no earlier block can be changed without also changing this block's header. The Merkle root compresses all 6,154 transactions into a single hash: alter one digit in any payment and the root changes.

A hash function (bitcoin uses double SHA-256) turns any input into a fixed-length string. The same input always gives the same output, while the tiniest change gives a completely different one. Working backwards from a hash, or finding a different input with the same hash, is not feasible in practice.

How does blockchain work? A transaction, step by step

1. Sign. The owner signs a payment with the private key held in their wallet. The signature proves the right to spend without revealing the key.
2. Broadcast. The transaction goes out to the network. Nodes check the signature and that the coins are unspent, then hold it in the mempool, the queue of unconfirmed transactions (how mempool fees work).
3. Assemble. A miner picks transactions from the mempool, usually the highest-paying ones, computes the Merkle root and adds the hash of the latest block.
4. Proof of work. The miner cycles through the nonce and other fields until the header's hash falls below the difficulty target. Think of it as a lottery where each ticket is one hash.
5. Verify and accept. The winning block is broadcast, and every node independently checks each transaction and the hash itself. If everything is valid, the block joins the chain.
6. Confirmations. Each block stacked on top of yours adds a confirmation. The more there are, the more expensive it becomes to reverse the payment.

Bitcoin produces a block roughly every 10 minutes on average; the network retargets difficulty every 2,016 blocks to hold that pace (hashrate and difficulty explained).

Why is a blockchain so hard to tamper with?

Say an attacker wants to rewrite a payment in a block that already has six confirmations. Changing the transaction changes the Merkle root, and with it the block's hash. The next block still points to the old hash, so the link breaks. To get the altered version accepted, the attacker must redo the proof of work for that block and all six after it, and do it faster than the honest network keeps adding new ones. Nodes follow the valid chain with the most accumulated work.

Our data shows the scale of that work: on October 31, 2026, bitcoin's network hashrate was estimated at 1,068 EH/s, about 1.07 × 10²¹ hashes per second (mempool.space data, in the "All numbers" block on our homepage). Outrunning that would take computing power comparable to every miner on the planet combined.

Smaller networks are easier targets. In summer 2020 Ethereum Classic suffered several 51% attacks. In the first, between July 29 and August 1, an attacker rewrote more than 3,000 blocks and double-spent over 800,000 ETC, about $5.6 million at the time (Finance Magnates, CoinGeek); a second attack on August 6 reorganized more than 4,000 blocks. The lesson: blockchain immutability isn't a law of physics, it's the cost of an attack, and that cost rises with the resources securing the network.

Mining vs staking: who decides the next block?

The rule for agreeing on the next block is called a consensus mechanism. Two dominate.

The Ethereum figures come from ethereum.org's pages on blocks and proof of stake: time is split into 12-second slots and 32-slot epochs, with a random validator proposing the block in each slot. For collateral and yields see our guide to crypto staking; for how the two networks differ, read Ethereum vs bitcoin.

Public vs private blockchains

NIST splits blockchains into permissionless and permissioned. Anyone can join a permissionless network such as bitcoin or Ethereum: run a node, send a transaction, help produce blocks. In a permissioned network, an owner, usually a consortium of companies, decides who participates.

Permissioned chains are faster and cheaper, but they give up the core property. If a handful of known organizations can agree to rewrite history, the guarantee rests on trusting them, just like an ordinary database. So when a company says "we're using blockchain," it's worth asking who runs the nodes and who can change the rules.

Where blockchain is actually useful

• Money without a middleman. Bitcoin and other cryptocurrencies are the most battle-tested use: peer-to-peer payments across borders, 24/7, no bank required.
• Stablecoins. Dollar-pegged tokens move over chains such as Ethereum and Tron like digital cash dollars.
• Smart contracts. Programs on a blockchain that execute automatically: token swaps, loans, collateral (DeFi).
• Tokenization. Bonds, funds and shares issued as tokens that can be transferred and tracked on a shared ledger.
• Timestamps and proof of existence. The Haber–Stornetta trick: publish a document's hash so you can later prove it existed at that moment and hasn't changed.

Common mistakes

• "Blockchains can't be hacked." Rewriting a large chain is practically impossible, but wallets, exchanges, cross-chain bridges and buggy smart contracts get hacked all the time. The chain records a theft as faithfully as an honest payment. Keep long-term holdings in a cold wallet.
• "Blockchain is anonymous." Public chains are transparent: every transfer and address balance is visible to anyone. Addresses carry no names, but links to exchanges often tie them to real people.
• "If it's on the blockchain, it's true." A blockchain guarantees a record hasn't changed since it was written, not that it was correct. Bad shipment data entered on-chain stays bad forever.
• "Everything needs a blockchain." If all parties trust one organization, a regular database is faster and cheaper. Blockchain makes sense where participants don't trust each other and there's no single referee.
• "In the mempool means sent." A payment is final only once it's in a block and has a few confirmations.

FAQ

How is a blockchain different from a regular database? In a regular database one owner can edit or delete any record. A public blockchain has thousands of copies, the same rules for everyone, and changing the past means redoing the work or forfeiting collateral.

Who owns the bitcoin blockchain? No one in particular. The rules live in software that nodes around the world run voluntarily; miners produce blocks, but nodes reject any block that breaks the rules.

How many confirmations should I wait for? It depends on the amount and the network. For large bitcoin payments, six blocks (about an hour) is the long-standing convention; many exchanges credit sooner. On smaller, low-hashrate networks it pays to wait considerably longer.

Can data be deleted from a blockchain? No. Every full node stores the entire history, which is why personal data shouldn't go on-chain, only hashes or references.

To see the bitcoin blockchain in today's numbers (block height, hashrate, fees), check the daily brief and the bitcoin page.

This is not investment advice.