A blockchain is a chain of data blocks where each block is mathematically locked to the one before it, so changing a single old record means dismantling every block that came after it.

That sentence is accurate, but it does not help much until you see what actually happens when a transaction is sent.

This article follows the process step by step. If what you need is the basic meaning and examples of its use across industries, that is covered in blockchain: meaning and benefits.

Key Points

• A transaction passes through five stages: signed, broadcast, verified, included in a block, then confirmed repeatedly.
• A hash is a fixed length digital fingerprint. Changing one character of the data changes the whole hash, and that is what locks the chain.
• Consensus is how the network agrees on which block is valid without a leader deciding.
• Proof of work secures the chain with the cost of electricity, proof of stake with assets that can be confiscated.
• Confirmation is not a yes or no, it is a level of certainty that strengthens as blocks pile up above your transaction.

What a block contains

A block has three parts.

• The transaction list

A set of records of value moving during a given period, usually hundreds to thousands of them.

• The previous block's hash

This is the part that forms the chain. Every block stores the fingerprint of the block before it.

• Supporting data

The creation time, the protocol version, and the number used in the mining or validation process.

The second part is what makes the structure a chain, and also what makes it hard to falsify.

Hashes: the fingerprint that locks the chain

Three properties of a hash function

A hash function turns data of any length into a string of characters of fixed length. Three properties make it useful here.

First, the same input always produces the same result. Second, changing a single character of the input produces a completely different hash, not a slightly different one. Third, you cannot work backwards from a hash to the data behind it.

Why one change breaks the whole chain

Now look at what that does to the chain. Block 900 stores the hash of block 899. If someone alters one transaction in block 899, the hash of block 899 changes entirely. The hash stored in block 900 no longer matches, and block 900 becomes invalid. To cover that up, they would have to recompute block 900, which then breaks block 901, and so on up to the newest block.

Changing one old transaction means redoing all the work since that transaction was created, faster than an entire network that keeps adding new blocks. That is where the security sits, not in secrecy.

The journey of one transaction

1. Signed

You create the transaction and sign it with your private key. The signature proves you own the sending address without ever revealing the key. The mechanism is covered in public keys, private keys and seed phrases.

2. Broadcast

The transaction goes to the few nodes you connect to, which pass it on to other nodes until it has spread across the whole network within seconds.

3. Verified

Every node checks it independently: the signature matches, the sender's balance is sufficient, the format follows the rules. A transaction that fails is discarded on the spot and not passed on.

4. Queued

Transactions that pass wait in a holding pool. Miners or validators choose which ones go into the next block, and they generally favour those paying higher fees. This is why fees rise when the network is busy.

5. Confirmed

Once the block containing your transaction is accepted by the network, you have one confirmation. Each subsequent block adds another, and the more blocks sit above it, the more impossible it becomes to reverse your transaction.

Consensus: how a network agrees without a leader

Thousands of computers that do not know each other have to agree on one version of the record. Without a leader, who decides which block is valid?

The answer is to make cheating more expensive than honesty. There are two main approaches.

• Proof of work

Miners compete to guess a number that produces a hash with a particular pattern. The process demands enormous computing power and therefore a great deal of electricity. Whoever finds the answer first gets to propose the block and collect the reward. To falsify history, an attacker would need more than half the network's computing power, and the cost of that far exceeds anything they could gain. Bitcoin uses this mechanism.

• Proof of stake

Validators lock up assets as collateral. They take turns being chosen to propose and verify blocks. If one is caught cheating, the collateral is confiscated. Security rests on the value staked rather than on electricity. Energy consumption is far lower, and most newer networks use it, including Ethereum since 2022.

Both reach the same goal through different tools: making dishonesty economically unprofitable.

Why transactions take time

Every network has its own rhythm for producing blocks. Bitcoin averages one block every ten minutes, Ethereum around twelve seconds, some other networks under a second.

The wait you experience comes down to two things: that rhythm, and how quickly your transaction gets picked for a block. If the network is busy and the fee you paid is low, your transaction may sit through several rounds first.

This is also why withdrawals from an exchange are not always instant. On top of network time there are the operator's internal checks and the minimum number of confirmations they require before treating funds as final.

The trilemma nobody has solved

Blockchain designers always face three things that are hard to maximise at once.

Three forces pulling against each other

Security is how expensive it is to attack the network. Decentralisation is how many independent parties take part in verification. Scalability is how many transactions can be processed per second.

Raising transactions per second usually demands heavier hardware to run a node, which reduces the number of independent participants. Keeping it possible for anyone to run a node means limiting how much each block can carry, which caps capacity.

The way around it: layer two networks

This is where layer two networks come from: transactions are processed on a separate layer, and only a summary is recorded to the main network. Capacity rises without sacrificing the security of the base layer, though it adds complexity and new trust assumptions.

Frequently Asked Questions

Can a blockchain transaction be reversed? No. Once confirmed, a transaction is final. Sending to the wrong address means the assets are gone unless the recipient chooses to return them.

What is a confirmation and how many are enough? A confirmation is the number of blocks added above the block containing your transaction. The more there are, the safer it is. What counts as enough differs by network and by operator.

Why do transaction fees keep changing? Because space in a block is limited and competed for. When many people transact at once, fees rise because higher payers go first.

Can a blockchain get full? The record keeps growing and can reach hundreds of gigabytes. This is not a capacity problem so much as a burden on anyone who wants to run their own node.

Who can see my transactions? On a public blockchain, everyone. Addresses carry no name, but the full history is open and can be traced.

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This article is for educational purposes and is not investment advice. Crypto assets carry high risk and prices can change at any time. Do your own research and consider your financial situation before making any decision.