How does blockchain work?
A step-by-step look at the path from sending a transaction to confirming it, the logic of validation and consensus, and the real trade-offs decentralisation brings.
A blockchain is a shared ledger where transactions are lined up in groups (blocks), and each block is cryptographically linked to the one before it. No single party can rewrite the ledger alone, because copies live on many computers across the network and changes must pass the rules.
Why it matters
What it means for a transaction to be “confirmed,” why you might wait a few minutes, and why a confirmed transaction cannot be reversed — all of this follows from how blocks and consensus work. Without that logic, fees, delays, and “my transaction is stuck” situations make no sense.
The lifecycle of a transaction
- 1Sign
The wallet signs the transaction with the private key.
- 2Broadcast
It is announced to the network and enters a waiting pool.
- 3Select and validate
Validators check it against the rules.
- 4Add to a block
Valid transactions are gathered into a new block.
- 5Confirm
Each block added on top makes it harder to reverse.
Validation and confirmation are not the same
Validation checks whether a transaction obeys the rules (enough balance, a valid signature). Confirmation is how many blocks have been added on top once it is written. More confirmations means a lower chance of it ever being reversed.
Centralised ledger vs blockchain
| Centralised system | Blockchain | |
|---|---|---|
| Who keeps records? | One institution | Many network participants |
| Changing records | The institution alone can | Rules and majority required |
| Speed | Usually faster | Can be slower due to validation |
| Transparency | Limited | Often public |
Myth vs reality
| “Blockchain makes everything anonymous and private.” | Most chains are public; addresses are pseudonymous, but transactions are visible. |
| “A transaction is final instantly.” | Finality grows but is not instant; it strengthens as confirmations accumulate. |
| “No one can make a mistake.” | Sending to a wrong address or a flawed contract is still valid by the rules — and irreversible. |
On-chain transactions are usually final and cannot be undone. Double-checking the address, network, and fee before sending is the cheapest way to avoid a loss.
Now that you see how the ledger works, you may wonder how it changes the model of the internet. Complete the picture by reading the difference between Web2 and Web3.