THE TECHNOLOGY BEHIND BITCOIN
What is a Blockchain?
A blockchain is a distributed, tamper-proof digital ledger that records transactions permanently and transparently. It is the foundational technology that makes Bitcoin — and thousands of other cryptocurrencies — possible.
What is a blockchain?
A blockchain is a type of database. Unlike a traditional database controlled by a single company or server, a blockchain is distributed across thousands of computers worldwide. Every participant holds a copy of the entire record. No single party controls it.
Data on a blockchain is organised into blocks. Each block contains a batch of transactions and a cryptographic reference (called a hash) to the previous block. This chain of references is what gives the blockchain its name — and its security. Altering any historical block would break the chain and be immediately detectable.
Once a transaction is confirmed and added to the blockchain, it is effectively permanent. It cannot be altered, deleted or reversed without the consensus of the entire network — which, in Bitcoin's case, is computationally infeasible.
How a blockchain works — step by step
A transaction is initiated
Someone initiates a transaction — for example, sending Bitcoin from one address to another. This transaction is broadcast to the network.
The transaction is validated
Nodes on the network check that the transaction is valid — that the sender has sufficient funds and that the transaction is properly signed with the correct private key.
The transaction enters the mempool
Valid transactions wait in a pool (the mempool) to be included in the next block. Transactions with higher fees are typically prioritised by miners.
Miners compete to add the block
Miners compete to solve a complex mathematical puzzle (proof of work). The first miner to solve it earns the right to add the next block and receives a Bitcoin reward.
The block is added to the chain
The new block, containing the batch of validated transactions, is added to the blockchain. All nodes update their copy of the ledger.
The transaction is confirmed
Once included in a block, the transaction has one confirmation. Each subsequent block adds another confirmation. After six confirmations, a Bitcoin transaction is considered highly secure.
Key properties of a blockchain
Decentralised
No single entity controls the blockchain. It is maintained by thousands of independent nodes worldwide.
Transparent
All transactions on a public blockchain are visible to anyone. Bitcoin's entire transaction history is publicly auditable.
Immutable
Once confirmed, transactions cannot be altered or deleted. The historical record is permanent.
Trustless
Participants do not need to trust each other or a central authority. The protocol enforces the rules automatically.
Permissionless
Anyone can participate in the Bitcoin network — sending transactions, running a node, or mining — without requiring approval from any authority.
Censorship-resistant
No government, company or individual can prevent a valid Bitcoin transaction from being included in the blockchain.
Types of blockchain
Public blockchain
Bitcoin, EthereumOpen to anyone. All transactions are publicly visible. Secured by decentralised consensus mechanisms.
Private blockchain
Hyperledger FabricControlled by a single organisation. Participants must be invited. Faster but not truly decentralised.
Consortium blockchain
R3 CordaControlled by a group of organisations. Semi-decentralised. Used in banking and supply chain applications.
Blockchain questions
Is blockchain the same as Bitcoin?
No. Blockchain is the underlying technology. Bitcoin is one application built on a blockchain. There are thousands of other blockchains and cryptocurrencies, each with different characteristics and purposes.
Can a blockchain be hacked?
The Bitcoin blockchain has never been successfully hacked. Its security comes from the enormous amount of computational work required to alter historical records. However, applications built on top of blockchains — exchanges, wallets, smart contracts — can have vulnerabilities.
What is the difference between a blockchain and a database?
A traditional database is controlled by a single entity, can be modified by administrators, and requires trust in that entity. A public blockchain is distributed, immutable, and trustless — no single party controls it and the record cannot be altered without network consensus.
What is a smart contract?
A smart contract is a self-executing programme stored on a blockchain that automatically enforces the terms of an agreement when predefined conditions are met. Smart contracts are a key feature of Ethereum and many other blockchains, enabling decentralised applications (dApps).