BlockchainDLT
A blockchain is a shared record of transactions grouped into blocks, where each block is cryptographically linked to the last, making past entries very hard to alter.
Every cryptocurrency transfer you make ends up in a blockchain. It is the record that says who owns what, kept not by one bank but by many computers at once. Understanding how it works explains why crypto transfers are hard to reverse, why they take time to confirm and why fees rise when the network is busy.
- Category
- Cryptocurrency and Blockchain
- Reading time
- 4 min
- Also called
- Distributed ledger, Shared ledger
- Updated
Blockchain in plain words
Think of a ledger that many people hold identical copies of. New transactions are collected into a block, checked and then added to the end of the chain.
Each block is cryptographically linked to the one before it, so changing an old entry would be obvious, and as more blocks are added, older ones become harder to change.1
Blockchains usually work without a central authority such as a bank, company or government.2 That is why the record, not a person, decides who owns a Stablecoin or any other token.
How a transaction gets onto a blockchain, step by step
You sign a transaction
Your wallet signs the transfer with your private key, proving you control the funds.
It is broadcast
The signed transaction is sent to the network’s computers (nodes).
It waits to be included
Pending transactions wait; a higher fee usually means faster inclusion.
A block is formed
Transactions are grouped into a block, validated and agreed by consensus.1
The block is linked
The new block is linked to the previous one and copied across the network.1
Confirmations build
Each later block makes the entry harder to change; exchanges often wait for several before crediting a deposit.
Worked examples
Example 1 — Waiting for confirmations
About 1 hourAn exchange credits a deposit after 6 confirmations. The network adds a block about every 10 minutes.
| Wait time | 6 × 10 minutes = 60 minutes |
| Status | Credited after about 1 hour |
Deposits are not instant because the exchange waits until the entry is buried under enough blocks to be very hard to change.1
Example 2 — Network fees in a busy market
Fee 0.4% of transferYou send funds when fees are high. The fee is 0.0002 coins and you send 0.05 coins.
| Fee share | 0.0002 ÷ 0.05 = 0.4% |
| Received | 0.05 coins (fee paid on top) |
On small transfers a fixed network fee is a large percentage; batch transfers when you can.
Example 3 — A wrong address
Funds lostYou paste the wrong address and send $1,000 worth of coins.
| Sent | $1,000 |
| Recoverable | Usually $0 |
With no central authority to reverse it, a confirmed transfer usually stays where it went.2
Blockchain vs. a bank’s ledger
| Aspect | Blockchain | Bank ledger |
|---|---|---|
| Who keeps it | Many network participants | The bank |
| Reversing a payment | Very hard | Possible in many cases |
| Visibility | Usually public | Private |
| Opening hours | 24/7 | Depends on the bank |
Where traders meet blockchains
Exchange deposits and withdrawals
Moving coins between exchanges and wallets is a blockchain transaction.
Tokens and stablecoins
Stablecoins and other tokens live on blockchains.
On-chain data
Some traders watch flows and activity as extra context.
Self-custody
Holding your own keys means the blockchain is your only record.
Advantages and disadvantages
Advantages
- Hard to alter past records.
- Runs around the clock.
- Works without a single central operator.
- Transactions can often be checked publicly.
Disadvantages
- Mistaken transfers are usually permanent.
- Fees and confirmation times rise when the network is busy.
- Public records can reveal transaction history.
- Not every blockchain is equally secure or decentralised.
Going deeper
Read as far as you need. Each level builds on the one before it.
Blocks and links
Beginner
A block is a batch of transactions; the link to the previous block is what makes the chain tamper evident.1
Consensus
Intermediate
Network participants follow agreed rules to decide which block comes next, and conflicts are resolved automatically by those rules.1 Different blockchains use different consensus methods.
Blockchain is not the asset
Advanced
The technology records ownership; it does not make the asset valuable or safe. Crypto assets recorded on blockchains can be exceptionally risky and volatile.3 See Volatility and Counterparty Risk.
Common mistakes
Assuming transfers can be undone
A confirmed transfer usually cannot be recalled.
Using the wrong network
Sending a token on a network the receiver does not support can lose it.
Ignoring fees
Network fees can be large compared with small transfers.
Equating ‘on a blockchain’ with ‘safe’
The record is secure; the project behind a token may not be.
Check your understanding
Test yourself before moving on. Each answer comes with an explanation.
Key points to remember
- A blockchain is a shared ledger of transactions in linked blocks.
- Old entries become harder to change as blocks are added.
- There is usually no central authority to reverse transfers.
- Fees and confirmation times vary with network demand.
- The technology does not make a crypto asset low-risk.
Frequently asked questions
Is blockchain the same as Bitcoin?
Can anyone see blockchain transactions?
Can a blockchain be hacked?
Further learning
- Stablecoin
A common token built on blockchains.
- Exchange
Where most people first buy crypto.
- Settlement
How settlement works in other markets.
- Counterparty Risk
The risk of trusting a platform with your coins.
Sources
This article is written in our own words. The sources below support the specific facts, rules and figures marked with a number in the text. Links open the original publisher’s page.
- NIST CSRC Glossary. blockchain (opens in a new tab) Checked .
- NIST. NISTIR 8202: Blockchain Technology Overview (opens in a new tab) Checked .
- FINRA. Crypto Assets (opens in a new tab) Checked .
Educational content, not financial advice. Examples use hypothetical prices and simplified costs; actual fees, margin rules and regulations vary by broker, market and country. We are not affiliated with any publisher linked above. Last reviewed . Report an error or request a source credit.