How A Blockchain Works

On this page, we will learn what a blockchain is, how it works, and why it matters.

What Is A Blockchain?

A blockchain is an immutable (can’t be changed), digital ledger (history of transactions) that facilitates the process of recording transactions and tracking data in a network; it is updated and shared across many computers in a network.

Data can be anything (from assets to information).

How Does A Blockchain Work?

Read this article for a simple overview of how a blockchain works:

The Article

That was a high-level explanation of a blockchain but doesn’t tell the full story...

How Does It Really Work?

Blockchain networks are driven by systems of aligned incentives. A well-functioning public blockchain requires a community of users, miners, & developers who all play roles in a mutually beneficial network ecosystem.

A blockchain is maintained by a distributed network of parties (“miners” or “validators,” depending on the kind of chain). These parties produce blocks jointly via consensus. In simple terms, the role of who produces a block rotates randomly among the different nodes while all the nodes verify it. If the block is verified, it gets permanently added to the chain.

What Is The Benefit of Blockchain Technology?

Trust: Blockchain’s decentralized nature means that information is stored and synchronized across a number of computers and is tamper-resistant, creating trust in the data. Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.

Read this article to learn the benefits of being able to trust code:

Computers that can make commitments is a huge unlock of opportunities. This simply wasn’t possible before, so there is a lot of exploring and creating to be done (by someone like you)!

Still Confused?

Good, you should be confused. Why? Two reasons:

  1. We don’t have a perfect explanation. You shouldn’t accept what we say as fact. If you do, you will probably find some gaps of knowledge since we try to simplify things :)
  2. This stuff is complex. Your brain will probably come up with a lot of questions to try and form a mental model of blockchain. As a result, you will feel confused. This means you are learning!!!

Let’s continue on with a high level overview of blockchain. Here’s a video by YouTube GOAT WhiteboardCrypto:

Hopefully, that video cleared up some confusion and answered questions you had. It covered the basics of a blockchain and intertwined helpful examples. It introduced blocks, hashing functions, decentralization, mining, and the chain. This is how pretty much all blockchains work, at a high level. It is how they maintain security while staying decentralized. But, that video stayed pretty high level. Per usual, we will go a little bit deeper!

We wrote this article to explain how a blockchain works at a more fundamental level. This article is meant to provide a holistic view on Bitcoin & blockchain. It explains why they matter and how they work. Jump in!

Alright, so now we have the basics of blockchain. We know what a blockchain is, why it matters, & how it works. Awesome!!

Want to learn more or still unclear? Here are some extra resources:

Further Resources


Blockchain is creating a world of digital assets and open source software that is real and permanent as anything physical and built to interoperate like Lego sets. Now don’t get me wrong, the barriers to adoption are incredibly highSpeed, scalability, user experience, and cost will have to change dramatically before any of you will consider using these tools in your daily life. But if you squint, something absolutely incredible is starting to happen.

For the first time, we have both the reason and the ability to tear down the feudal castles that control our online experiences. For the first time, we can transition to true digital freedom, where identity, self-expression, and ownership is back where it belongs: in your hands.

We’ve learned a lot so far. We now know how a blockchain works and why it matters. Bitcoin was the pioneering application of a blockchain technology. It is one of the most simple blockchain applications. It marked the beginning of many blockchain iterations - many of which are much more effective and sophisticated than Bitcoin.

But, there is one that stands above the rest....Ethereum!! Ethereum has laid the foundation for a decentralized future.


It is a blockchain platform. This means applications can be built on top of it and leverage blockchain tech.

Since Ethereum, there have been many other blockchain platforms built. All of them have different intentions, benefits, and downsides. But, they are all trying to foster an ecosystem of crypto innovation.

Check out the next page to learn more!

Dive In!

Explain It Yourself