How Blockchain Actually Works: Blocks, Nodes and Consensus
The mechanics behind the buzzword: how a transaction becomes a block, how a block becomes permanent, and what actually stops anyone from rewriting the record.
By Firoz Khan|1 September 2026|Updated 20 September 2026|8 min read
'How does blockchain work' tends to get answered with an abstraction, a shared ledger, a chain of blocks, without walking through what actually happens between you signing a transaction and it becoming a permanent part of the record. It's a four-step process, and each step is doing a specific, necessary job.
Step one: a transaction gets broadcast
You sign a transaction with your private key, proving you have the authority to move the asset, and it's broadcast out to the network. It doesn't go anywhere in particular, it lands in a shared pool of pending, unconfirmed transactions, often called the mempool, waiting to be picked up.
Step two: transactions get bundled into a block
Miners or validators, depending on the network, select a batch of pending transactions from that pool and assemble them into a candidate block. On a busy network, transactions offering a higher fee are typically prioritised for inclusion, which is the root cause of gas fee spikes during congestion.
Newsletter
Get the best of our crypto and money content every week
Straight to your inbox, once a week.
By subscribing you agree to receive our weekly newsletter and to our Privacy Policy. No spam, unsubscribe anytime.
Step three: the network has to agree
Before a candidate block is accepted, the network needs to reach consensus that it's valid. Proof of Work, still used by Bitcoin, has miners compete to solve a computational puzzle, with the winner proposing the next block. Proof of Stake, used by Ethereum since 2022, has validators who've locked up the network's coin as collateral take turns proposing and verifying blocks instead. Both exist to solve the same underlying problem: preventing the same coin being spent twice.
Step four: the block gets chained on, permanently
Once accepted, the new block gets a cryptographic hash that incorporates the hash of the block before it, physically linking the two. Altering any transaction in an old block would change that block's hash, breaking the link to every subsequent block and immediately flagging the chain as invalid to every other node holding a copy.
Why this design is deliberately inefficient
Requiring thousands of independent nodes to check and store the same data, and requiring genuine computational or economic cost to propose a new block, is slower and more expensive than a conventional database by design. That inefficiency is the trade-off that removes the need for a single trusted party, which is the entire reason the technology exists in the first place.
A reminder
The FCA risk warning still applies to higher-risk crypto content. Always assess how much risk you are willing to take before buying.
Related reading