What is a blockchain? A plain-English guide

A blockchain is a shared record of transactions that thousands of computers keep at the same time. Nobody owns the master copy. Instead, the computers follow the same rules to agree on which transactions are valid and in what order.

Blocks and chains

Transactions are grouped into blocks. Each block includes a cryptographic fingerprint (a "hash") of the block before it, linking them into a chain. Change anything in an old block and its fingerprint changes, breaking every link after it. That's why blockchains are described as tamper-evident.

Who decides what's valid?

Because there's no central bank or company, a blockchain needs a way for strangers to agree. This is called consensus.

• Proof of work (Bitcoin): computers called miners compete to solve a hard puzzle. The winner adds the next block and earns new coins. Cheating would need more computing power than the honest miners combined.
• Proof of stake (Ethereum and others): validators lock up ("stake") coins as a deposit. They're chosen to add blocks and can lose part of their stake if they cheat.

Public and permanent

On most public blockchains, anyone can view every transaction. Addresses aren't names, but they aren't anonymous either: with enough clues, addresses can often be linked to people. And once a transaction is confirmed, it can't be reversed. There's no "undo" or chargeback, which is exactly why scammers like it.

Smart contracts

Some blockchains, such as Ethereum, can run small programs called smart contracts. They power tokens, exchanges without a middleman ("DeFi") and digital collectibles. A bug in a smart contract can lose money, and can't always be fixed, so audits matter.

What blockchains are good for

• Moving value across borders without a bank in the middle
• Assets whose supply rules are public and hard to change
• Records that many parties need to trust without trusting each other

What they're not good for

Blockchains are slower and more expensive than an ordinary database. If one trusted organisation can just keep the records, a blockchain usually adds cost without adding much. Be sceptical of projects that add "blockchain" to something that doesn't need it.