A blockchain is a shared, tamper-resistant record of transactions that is kept by many computers at once instead of by one central party. Transactions are grouped into blocks, and each block contains a cryptographic fingerprint (hash) of the previous one, forming a chain. Changing an old transaction would change its block's fingerprint and break every block after it, which the rest of the network would immediately reject. The first blockchain was Bitcoin, launched in 2009; Ethereum (2015) added programmable smart contracts.
How does a blockchain work?
- Transaction: a user signs a transaction with their private key, for example sending tokens or calling a smart contract.
- Distribution: the transaction is broadcast to the nodes in the network.
- Consensus: the network agrees on which transactions go into the next block. Bitcoin uses proof of work (mining); Ethereum switched to proof of stake in 2022, where validators lock up coins as collateral.
- Chaining: the new block is added and linked to the previous one by its hash.
- Replication: every node stores a copy, so there is no single point of failure or control.
Public and private blockchains
Public blockchains such as Bitcoin, Ethereum and Solana are open to everyone: anyone can read the data, send transactions and, in principle, take part in consensus. Private or permissioned blockchains are run by a known group of organisations, for example a consortium of companies sharing supply chain data. They are faster and more private, but lose part of the independence that makes public blockchains valuable.
What are blockchains used for?
Digital money and payments, stablecoins, decentralised finance (DeFi), tokens and NFTs, tokenised real-world assets, supply chain traceability, digital certificates, and any situation where several parties that don't fully trust each other need one shared, verifiable record.
When is a blockchain not the answer?
A blockchain is slower, more expensive and harder to change than a normal database. If one organisation controls the data and its users trust it, a well-secured database with an audit trail is almost always the better choice. Blockchain adds value when there is no natural central party, when independent verification matters, or when you want to interact with existing networks, tokens and wallets. See our blockchain development services and what is the EVM.
Frequently Asked Questions about Blockchain
Is blockchain the same as Bitcoin?
No. Bitcoin is the first and best-known application of blockchain technology. Thousands of other blockchains and applications exist, from Ethereum to private business networks.
Can a blockchain be hacked?
Large public blockchains are extremely hard to alter, because an attacker would need to control a majority of the network. Most losses happen elsewhere: in bugs in smart contracts, stolen private keys, or hacked exchanges and bridges.
Is data on a blockchain private?
On public blockchains, no: all transactions are visible to everyone, linked to pseudonymous addresses. Personal data should not be stored on a public blockchain, also because it cannot be deleted, which conflicts with the GDPR.
Does blockchain use a lot of energy?
Proof-of-work blockchains such as Bitcoin do. Proof-of-stake blockchains such as Ethereum use only a tiny fraction of that energy; Ethereum's switch in 2022 cut its energy use by more than 99%.