What is a blockchain, in plain words

Imagine a shared notebook in which all of a city's money transfers are written. The notebook is not kept by one person: thousands of residents hold a copy, and every new transfer is entered into all copies at once. To forge a record you would have to rewrite most of the notebooks at the same time. That is a blockchain - a shared ledger that cannot be quietly edited after the fact.

What a blockchain is made of

A transaction is one record: "address A sent address B this much" or "address A called a program's function". Transactions are signed with the sender's private key, so nobody can fake someone else's transfer.

A block is a batch of transactions packed together with a timestamp. On Ethereum a new block appears about every 12 seconds, on Base and Polygon much more often.

A chain is blocks linked together. Each block contains the hash of the previous one. A hash is a "fingerprint" of data: any data turns into a short string of fixed length, and if you change a single character in the data, the fingerprint becomes completely different.

Who decides which block to add

Copies of the ledger are held by thousands of computers - nodes. They must agree on which next block counts as real without trusting each other. The rules of such agreement are called consensus.

Ethereum uses proof of stake. Participants called validators put up a deposit in ETH and take turns proposing blocks, while the others check them. A dishonest validator risks losing the deposit - honesty turns out to be more profitable than cheating.

Earlier (in Bitcoin and old Ethereum) proof of work was used: computers competed at solving a hard puzzle and the winner earned the right to add a block. The principle is the same - cheating must cost more than honest work.

Public and private blockchains

In a public blockchain - Ethereum, Base, Polygon, BNB Chain - anyone can take part and read the records. All transactions are visible to everyone: sender and receiver addresses, amounts, program calls. There are no names, only addresses, so we speak of "pseudonymity", not "anonymity".

In a private blockchain an organisation picks the participants. It is faster, but trust goes back to the same centre we wanted to avoid.

What a blockchain gives and does not give

It gives:

• Immutability - what is recorded cannot be quietly rewritten.
• Transparency - anyone can verify what happened.
• No single point of failure - the network works even if some nodes switch off.
• Rule execution without a middleman - more in the article on smart contracts.

It does not give:

• Protection from mistakes. Sent money to the wrong address - nobody can return it. Transactions are irreversible.
• Truth about the outside world. A blockchain guarantees a record is unchanged, not that it is true. If a seller records "goods shipped" and they were not, the network will not know.
• Instant and cheap always. Block space is limited, and when many want it fees rise.

Why this matters for deals

The classic guarantee of a deal rests on trust in a middleman: a bank, a platform, a private guarantor. A blockchain lets you replace trust in a person with trust in rules written in a program that anyone can check. That is the basis of guarantor deals on a smart contract.

What to read next

The next step is to learn what cryptocurrency is, how Bitcoin differs from Ethereum and how a hash function works - the very "glue" of a blockchain. Then move on to wallets and keys. Met an unfamiliar word? Look in the glossary.