A blockchain is a shared, append-only ledger maintained by many independent participants rather than by a single operator. A cryptocurrency is one application of that ledger, in which the recorded entries are balances and transfers. This page describes the mechanics only, and is not investment or financial advice.
01The mechanism
Transactions are grouped into blocks. Each block includes a cryptographic hash of the block before it, so any change to earlier data would alter every hash that follows and be immediately detectable. That chaining is where the word "blockchain" and the property usually described as immutability come from — the record is not literally unchangeable, it is tamper-evident and expensive to rewrite.
Because there is no central authority to decide which version of the ledger is correct, participants need a consensus mechanism. Proof of work requires solving a computationally expensive puzzle to propose a block, making rewriting history costly in energy and hardware. Proof of stake instead requires validators to commit assets that can be forfeited for misbehaviour. Both aim at the same goal: making it more expensive to attack the ledger than to follow its rules.
Ownership is established by public-key cryptography. An account is a key pair; the private key signs transactions and is the sole means of control. There is no account recovery in the ordinary sense, which is why key custody, rather than the network itself, is where most losses actually occur.
Smart contracts extend the model by storing executable code on the ledger, so that transfers can be made conditional and programmatic. Deployed contract code is generally difficult or impossible to amend, which raises the stakes on correctness considerably.
02Trade-offs to be clear about
Decentralised consensus is expensive by design. Every full participant validates and stores the same data, which caps throughput far below a centralised database and adds confirmation delay before a transaction can be treated as settled. Layered and off-chain designs exist to raise throughput, and they generally do so by relaxing some of the guarantees of the base layer.
Transactions are typically irreversible, which removes the chargeback and correction paths that conventional payments rely on. Public ledgers are also transparent: addresses are pseudonymous rather than anonymous, and the full transaction history is visible to anyone, which has privacy implications that are frequently underestimated.
Permissioned or private ledgers, where participants are known and admitted, trade openness for control and performance. They are worth evaluating against a conventional shared database, since if a single trusted operator is acceptable, the distributed ledger is often not adding anything.
03Where it fits
The honest test for any proposed use is whether multiple parties who do not fully trust each other need to agree on a shared record without a trusted intermediary. Supply chain provenance, digital ownership records and cross-organisation settlement are the cases usually cited. Where a single organisation controls the data anyway, the added complexity rarely pays for itself.
Regulatory treatment of cryptocurrency varies substantially between jurisdictions and covers taxation, custody, reporting and licensing. Any commercial use requires jurisdiction-specific advice rather than a general summary.