A blockchain is operated by nodes that run consensus protocols – like proof of work or proof of stake – so transactions get validated, broadcast, and permanently logged across the network.
What is a blockchain and why does it matter?
At its core a crypto blockchain is a sequence of blocks. Each block contains a header (with metadata) and a body (with transactions). The header includes a cryptographic hash of the previous block’s header, a timestamp, a nonce or stake-commitment, and a Merkle root summarizing all transactions in the block. That chaining of hashes means if anyone attempts to alter block N, the header’s hash changes, so block N+1’s stored “previous hash” won’t match, invalidating the chain.
What is a blockchain in crypto? The network of nodes (computers) holds copies of the ledger (often full nodes) and participates in consensus. Two major consensus mechanisms dominate public chains today: proof-of-work (PoW) and proof-of-stake (PoS). In PoW, nodes (miners) compete by expending computing power to solve a cryptographic puzzle; the first to find a valid solution publishes a new block and claims a reward.
Behind the scenes, you also have the peer-to-peer (P2P) network layer. Nodes broadcast “transactions” to their peers; each node validates incoming transactions and blocks (checks signatures, that the inputs aren’t spent, that the nonce or stake is valid, that the block header links correctly, etc).
Finally, you have the “finality” concept and layer-2 or side-chain scaling. On some chains the block chain is probabilistic (e.g., PoW: more confirmations ≈ more security). On many modern chains you’ll see mechanisms for faster finality (e.g., PoS plus BFT-style rounds). Also to scale, chains anchor shorter blocks or transactions to the main chain, lifting throughput while preserving security.
How blockchain works: the step-by-step process
- Step 1 – Create, sign, broadcast. Your wallet builds a transaction. On Bitcoin it chooses UTXO (Unspent Transaction Output) as inputs; on Ethereum it updates an account balance. You sign with your private key and broadcast to peers. The transaction lands in the mempool – the public queue – waiting to be picked up. Anyone can verify the data; no bank sits in the middle. And for those who are interested in use cases of DeFi mechanics, moonpay review provides a gate to the token world at hand.
- Step 2 – Get into a block. Nodes package transactions into a block. They hash the transactions into a Merkle tree and place the Merkle root plus the previous block’s hash in the block header. That link makes the chain tamper-evident. Fees decide inclusion and order. On Ethereum, the fee = gas used × (base fee + priority tip) under EIP-1559; wallets estimate it for you.
- Step 3 – Propagate, validate, finalize. The new block propagates across the peer-to-peer network. Each node checks signatures, rules, and the header link before extending its local chain. Security comes from depth: more blocks on top, more confidence. Bitcoin treats confirmations probabilistically; deeper is safer.
- Step 4 – Update state and scale. Once accepted, the network updates its state. Bitcoin’s UTXO set changes; Ethereum’s account balances and contract storage update, and events/logs emit. Smart contracts can trigger other actions automatically. For the scale of the question, what is blockchain in cryptocurrency, rollups batch many transactions and post compressed data (and proofs) to Ethereum as calldata, anchoring security on L1 while keeping throughput high.
Blockchain vs. traditional banking: what’s different?
When you send money through a bank, you’re relying on a centralized database controlled by one institution. The flow goes: deposit, interbank clearing, posting your balance later. A blockchain turns that upside down. Thousands of nodes each hold a copy of the ledger. Every new block links to the previous via a cryptographic hash, making tampering almost impossible.
Think of settlement. With many banks, cross-border transfers still take hours or days and hefty fees apply. On a public chain, you can move value in minutes – sometimes seconds – especially with layer-2 rollups. The rails don’t close for weekends. No business-hour windows. Just network nodes doing their job round the clock.
Finally, let’s talk cost, transparency and risk. Traditional systems pile in lots of intermediaries – clearing houses, custodians, accounting departments. More layers mean more cost and opacity. Blockchain replaces many of those with code-driven rules, public visibility of ledger entries, and fewer reconciliation cycles. Research suggests blockchain cross-border payments could generate cost savings of some 3,300% by 2030 thanks to fewer intermediaries.
Peyman Khosravani is a global blockchain and digital transformation expert with a passion for marketing, futuristic ideas, analytics insights, startup businesses, and effective communications. He has extensive experience in blockchain and DeFi projects and is committed to using technology to bring justice and fairness to society and promote freedom. Peyman has worked with international organizations to improve digital transformation strategies and data-gathering strategies that help identify customer touchpoints and sources of data that tell the story of what is happening. With his expertise in blockchain, digital transformation, marketing, analytics insights, startup businesses, and effective communications, Peyman is dedicated to helping businesses succeed in the digital age. He believes that technology can be used as a tool for positive change in the world.
