How a blockchain works
A user signs a transaction with a private key and broadcasts it to the network. Nodes check the signature and that the funds exist, and a miner or validator gathers valid transactions into a block.
Each block carries the hash, a digital fingerprint, of the previous one. Changing an old transaction would change that block's hash and break every later link, so the network would reject the altered copy.
Which block comes next is settled by the consensus mechanism: proof of work, where miners spend computing power, or proof of stake, where validators lock up coins that they lose if they cheat.
Kinds of blockchain
- Public and permissionless: anyone can read, send and validate, as on Bitcoin and Ethereum
- Permissioned: only approved parties run nodes, common in bank and market-infrastructure projects
- Layer 1: a base network with its own coin and its own security
- Layer 2: a network that batches transactions and settles them on a layer 1
Why a blockchain matters to a payments or crypto product
The blockchain is the settlement layer: a transfer is final once the network has confirmed it, at any hour, and no one can reverse it. A product connects to each network through nodes, watches for deposits, pays network fees and signs withdrawals.
Each network has its own address format, fees and speed, and the same stablecoin exists on several. Supporting a network is therefore a product decision of its own.
Blockchain, distributed ledger or database?
- Distributed ledger technology (DLT)
- The wider family: any ledger shared and synchronised across nodes. A blockchain is the kind that chains blocks of transactions together.
- Database
- Run by one operator who can edit any record. A blockchain spreads that control across nodes that have to agree.
- Cryptocurrency
- The asset recorded on a blockchain. The blockchain is the record itself.
Where a blockchain shows up in a platform
Modules that do the work
- Custody & walletsWallets on every major chain, with MPC custody from leading providers or your own keys.
- LedgerThe double-entry book of record behind every balance, fee and transfer.