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 25 September 2026|4 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.
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.
Proof of stake, in more detail
On Ethereum, time is split into 12-second slots. In each slot one validator is picked at random to propose a block, and a committee of randomly chosen validators votes on it. Dishonest behaviour can be punished by destroying some of the validator's staked ETH, which is what gives the system its teeth.
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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.
The Bitcoin whitepaper describes the same idea. Each timestamp includes the previous one in its hash, forming a chain. To change a past block, it says, an attacker would have to redo the proof of work of that block and all the blocks after it, and then catch up with and surpass the work of the honest nodes.
A payment, start to finish
Say Asha sends 0.01 bitcoin to Ben. Her wallet signs the transaction and broadcasts it. It sits in the mempool until a miner includes it in a block, which on Bitcoin takes about ten minutes on average. Ben's wallet then shows one confirmation. Each further block added on top makes reversing the payment harder. Ethereum.org says a Bitcoin transaction is generally considered irreversible after six blocks, which averages about an hour. The amounts and names are made up.
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.
What a blockchain does not do
A blockchain makes a record hard to alter. It does not make the record true. If wrong data goes in, the wrong data stays. And because transactions cannot be reversed, a mistake such as a wrong address usually stays too. Public chains are transparent, so anyone can see the transactions, but an address is not automatically tied to a name.
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.
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