What is blockchain?

Mar 06•4 min read

What is blockchain - a full guide by Nexo

Blockchain is a digital system for recording data in a way that makes it difficult or impossible to change, hack, or cheat. At its core, a blockchain is a distributed ledger made up of blocks that store transaction records. These blocks are linked together in chronological order, forming a secure and transparent record of activity.

Originally created to support cryptocurrencies, blockchain technology is now used in finance, supply chains, identity verification, and many other industries.

What is blockchain technology

Blockchain technology refers to the infrastructure that enables decentralized and tamper-resistant data storage across a network of computers. Each participant (or node) holds a copy of the blockchain, making the system resilient to data loss or manipulation.

Because it doesn’t rely on a central authority, blockchain technology allows value and information to move securely across borders without intermediaries.

What is a blockchain

A blockchain is a chain of digital blocks that each contain a list of transactions. Once recorded, the data in a block cannot be easily altered without changing all subsequent blocks — a feature that provides both transparency and security.

Each block contains:

  • A list of transactions

  • A timestamp

  • A reference (hash) to the previous block

  • A cryptographic hash of its own contents

This structure allows blockchains to serve as verifiable histories of events, transactions, or digital ownership.

What is blockchain technology and how does it work

Blockchain technology works by using distributed computing and cryptographic principles to create consensus about the state of a system. Instead of relying on a single server, blockchains use multiple nodes to validate and store data.

Here’s how it typically works:

  1. A user initiates a transaction.

  2. The transaction is broadcast to the network.

  3. Nodes verify the transaction’s validity using consensus rules.

  4. Validated transactions are grouped into a new block.

  5. The new block is added to the existing chain.

Once added, a block becomes part of an immutable record that can be viewed by all participants.

When was the first block of the Bitcoin blockchain, known as the genesis block, mined

The genesis block of the Bitcoin blockchain was mined on January 3, 2009. This block marked the start of the Bitcoin network and the beginning of blockchain-based digital assets.

The genesis block is also known for containing a message embedded by Bitcoin’s creator, referencing a newspaper headline from the same day — highlighting the motivation for creating a decentralized alternative to traditional finance.

How does a blockchain achieve consensus

A blockchain achieves consensus by having its participants agree on the validity of new transactions. This is done using consensus mechanisms, which vary by blockchain. The two most common are:

  • Proof of Work (PoW): Participants (miners) solve computational puzzles to validate blocks.

  • Proof of Stake (PoS): Validators are selected to propose and verify blocks based on the amount of assets they lock (stake) in the network.

These mechanisms ensure that the network operates reliably, even without a central authority.

How does blockchain work

Blockchain works as a peer-to-peer system where each participant has access to the same version of data. When a transaction is initiated, it must be validated according to predefined rules before being added to the ledger.

Key characteristics that support this process include:

  • Distributed storage

  • Cryptographic verification

  • Immutable block structure

  • Transparent access to transaction history

Together, these features make blockchain a trustworthy system for recording and verifying information.

How does a blockchain handle smart contracts

Blockchains that support smart contracts can automatically execute predefined rules when specific conditions are met. These contracts are coded into the blockchain and function without the need for manual intervention or third parties.

For example, a smart contract could be used to release payment only when certain conditions are verified on-chain. This functionality is especially common in decentralized finance (DeFi) and tokenized systems.

What are the key features of a blockchain smart contract

A blockchain smart contract typically includes the following features:

  • Autonomy: Executes automatically without external control

  • Transparency: Contract code is visible and verifiable by all participants

  • Immutability: Once deployed, contract logic cannot be altered retroactively

  • Determinism: Produces the same outcome every time it runs under the same conditions

These properties enable the creation of decentralized applications and programmable assets.

How does blockchain ensure immutability

Blockchain ensures immutability through a combination of cryptographic hashing and distributed consensus. Once a block is confirmed and added to the chain, any attempt to alter its data would change its hash — making it invalid in the eyes of the network.

Additionally, because every participant has a copy of the blockchain, altering data on one node does not affect the others. This combination of transparency and redundancy helps preserve the integrity of historical records.