Glossary
Blockchain
A shared, append-only ledger of transactions grouped in linked blocks and maintained by a network of computers.
On this page
A blockchain is a digital record of transactions that is copied across many computers and grouped into blocks, each of which is cryptographically linked to the one before it. Because changing an old entry would mean rewriting every later block on most copies of the ledger at once, the record is extremely hard to alter. Blockchains are the technology underneath bitcoin, ether and other cryptocurrencies, and they are being tried for settling traditional assets too.
How it works
- Users broadcast transactions, signed with private keys that prove ownership.
- Network participants gather pending transactions into a candidate block.
- A consensus mechanism decides whose block is added. In proof of work, used by bitcoin, miners spend computing power to solve a puzzle. In proof of stake, used by Ethereum since its 2022 "Merge," validators lock up coins as collateral and can lose them for dishonest behavior.
- Each new block contains a hash, a kind of digital fingerprint, of the previous block. Altering any past transaction changes its hash and breaks every link after it.
Strengths and limits
Public blockchains let strangers transact without a central intermediary and leave a transparent, auditable history. The trade-offs include limited throughput, fees that spike when networks are busy, the energy use of proof of work and irreversibility: a mistaken or stolen transfer generally cannot be undone. "Permissioned" blockchains run by a known group of institutions give up openness for speed and control. A blockchain records who controls an entry; it does not guarantee that the asset an entry represents is real or valuable.