What Is a Blockchain? A Plain-English Guide for Beginners
A blockchain is a shared record of transactions that thousands of computers keep a copy of, so no single company is in charge of it. Bitcoin, Ethereum and most other cryptocurrencies run on one.
- Block: a batch of new transactions.
- Chain: each block is locked to the one before it, in order.
- Nodes: the computers around the world that each keep a copy.
- Result: a record that's very hard to change and doesn't need a bank in the middle.
Think of a shared notebook
Imagine a notebook where every payment between a group of friends is written down. Instead of one person keeping it, everyone has an identical copy. When someone pays someone else, the new line is checked and added to every copy at once. If one person tried to rub out a line in their copy, it wouldn't match everyone else's, so it would be ignored.
That's the idea behind a blockchain. The "friends" are thousands of computers called nodes, and the notebook is the blockchain.
Blocks and the chain
New transactions are collected into a block. On Bitcoin, a new block is added roughly every 10 minutes. Each block contains a hash: a short digital fingerprint of the block before it. Change anything in an old block and its fingerprint changes, which breaks the link to every block after it. That chain of fingerprints is what makes the history so hard to rewrite.
Who decides what gets added?
Because nobody is in charge, the network needs a way to agree on the next block. This is called a consensus mechanism. The two you'll hear about most are:
- Proof of work: computers compete to solve a hard puzzle, and the winner adds the next block. Bitcoin uses this. It's secure but uses a lot of electricity.
- Proof of stake: people lock up ("stake") coins for the chance to add blocks, and can lose them if they cheat. Ethereum switched to this in 2022, cutting its energy use dramatically.
Wallets, addresses and keys
You don't keep coins "in" a wallet. The coins live on the blockchain, and your wallet holds the keys that prove they're yours.
- Address: like an account number. You can share it so people can send you crypto.
- Private key: like the password that lets you spend from that address. Never share it.
- Seed phrase: 12 or 24 words that can rebuild all your keys. Anyone who has it can take everything. Write it down offline and never type it into a website or message.
If you leave crypto on an exchange, the exchange holds the keys for you. That's convenient, but it means you're trusting the exchange. Our guide on keeping your crypto safe explains the trade-off.
What blockchains are good at, and what they're not
- Good at: sending value anywhere without a bank, keeping a public record that's hard to tamper with, and running programs ("smart contracts") on networks like Ethereum.
- Not good at: undoing mistakes. There's no "reverse payment" button. Send crypto to the wrong address and it's usually gone.
- Not anonymous: most blockchains are public, so transactions can be traced, even though names aren't written on them.
Why this matters if you trade crypto
Understanding the blockchain explains a lot of crypto's quirks: why transfers take time to confirm, why fees go up when a network is busy, and why scammers love crypto (payments can't be reversed). It also explains why crypto trades 24/7: there's no exchange opening hours on a network that never stops.
Coming soon: the Trade Blocks blockchain course. A full beginner course on how blockchains work, wallets and keys, coins and tokens, and staying safe. Join the free Discord to hear first when it opens.
Questions people ask
What is a blockchain in simple terms?
A shared record of transactions that thousands of computers keep a copy of. New entries are grouped into blocks, and each block is locked to the one before it, so past entries are very hard to change.
Is Bitcoin the same as blockchain?
No. Bitcoin is a cryptocurrency that runs on its own blockchain. Blockchain is the technology underneath, and many other coins and projects use their own blockchains.
Can a blockchain transaction be reversed?
Generally, no. Once a transaction is confirmed it's permanent, and there's no bank to call for a refund. That's why sending crypto to the wrong address or to a scammer usually means the money is gone.
Is crypto on a blockchain anonymous?
Not really. Most blockchains are public, so anyone can see the transactions linked to an address. Your name isn't written on it, but addresses can often be traced back to a person, for example through an exchange account.
Read next
Learn it properly, for free
Ten short lessons on charts, stop losses and risk, with a quiz after each one and a certificate at the end. Built for crypto, and it works on forex and gold too.
Want more? Founding VIP adds 40 in-depth lessons, with a new one every week and a new feature every month.
Educational content only. Not financial advice. Trading crypto, forex and gold is high risk and you can lose all the money you put in.