What is a blockchain?

By the Blockhorizon Editorial Team · Updated 2 October 2026 · How we check facts

What does a blockchain actually do?

At its core a blockchain is a ledger — a list of transactions, like the pages of an accounts book. What makes it different is how that ledger is kept:

• Shared. Many computers (nodes) hold a copy, instead of one company holding the master copy.
• Grouped into blocks. New transactions are bundled together and added as a block.
• Chained. Each block contains a fingerprint of the block before it, linking them in order.
• Agreed by rules. The nodes follow a shared procedure — a consensus model — to decide which new block gets added.

NIST, the US standards body, defines blockchains as “tamper evident and tamper resistant digital ledgers”, usually run without a central authority.

What is inside a block?

NIST describes two parts. The block data is the list of transactions. The block header is a short summary that typically includes:

Every block except the very first one (the “genesis block”) points back to the header of the previous block.

What is a hash, and why does it make records hard to change?

A hash function takes any input — a word, a file, a whole block of transactions — and turns it into a fixed-length output called a digest. SHA-256, the function Bitcoin uses, always produces 256 bits. Change even one character of the input and the digest changes completely.

Because each block stores the hash of the previous block’s header, editing an old transaction would change that block’s hash, which would break the link stored in the next block, and the next, all the way to the newest block. Anyone comparing copies would see the mismatch. That is what “tamper evident” means.

NIST lists three security properties a hash function needs: it should be infeasible to work backwards from a digest to its input, infeasible to find a second input with the same digest, and infeasible to find any two inputs that collide.

Who decides which block is added next?

That is the job of the consensus model. NIST describes several, including:

• Proof of work — the first participant to solve a computationally hard puzzle publishes the next block. NIST notes the costs: heavy computation, high power use and a hardware arms race. Bitcoin uses this model.
• Proof of stake — the more of the system’s currency a participant has locked up (“staked”), the more likely they are to be chosen to publish. NIST points out that nothing stops large holders from pooling stake into a centralised power.
• Round robin, proof of authority and proof of elapsed time — models NIST discusses mainly for permissioned systems, where participants are known.

What is the difference between permissionless and permissioned blockchains?

In a permissionless blockchain, anyone can run a node and publish blocks without asking anyone. Public cryptocurrencies work this way. In a permissioned blockchain, only authorised participants can publish — typical for company or consortium systems.

NIST also distinguishes between node types: full nodes store and check the whole chain, publishing nodes also create new blocks, and lightweight nodes rely on full nodes instead of storing everything.

What are the limits of blockchain technology?

This is the part most explainers skip. NIST devotes a whole section to limitations and misconceptions, including:

• “Immutable” is an overstatement. Records are hard to change, not impossible, and applications often treat later blocks as corrections to earlier ones.
• “No trust needed” is a myth. You still trust the software, the people who maintain it and the other participants.
• It cannot control the physical world. A blockchain can record that someone promised to deliver goods; it cannot make them deliver.
• Blockchains can die. A chain only works while participants keep running it; NIST lists “blockchain death” as a real possibility.
• Incentives can fall short. NIST also flags inadequate rewards for publishing blocks as a risk.
• Keys and identity are still hard. Whoever holds a private key controls the assets, which makes key loss and theft a central risk (see wallets and private keys).

NIST’s conclusion is sensible advice for any beginner: treat blockchain like any other technology and use it only “in appropriate situations”.

Does a blockchain make a crypto investment safe?

No. The ledger’s design says nothing about whether a coin will hold its value, whether a platform holding your coins is solvent, or whether a project is honest. UK and EU regulators warn that crypto prices are highly volatile and that you could lose all the money you invest. Read our crypto scam red flags before trusting any project that uses “blockchain” as a selling point.