What Is a Blockchain? Definition & How It Works
A blockchain is a distributed database where records are grouped into blocks, each cryptographically linked to the one before it. The chain is maintained by a decentralized network of nodes that independently verify every transaction — no central authority required.
Structure: blocks and chains
Each block contains a batch of validated transactions, a timestamp, and the hash (cryptographic fingerprint) of the previous block. This hash linkage is what makes the structure a "chain" — and what makes tampering detectable. Alter a transaction in block 500 and you invalidate block 501, 502, and every block after it.
The chain grows as new blocks are appended through a consensus process. On Bitcoin, miners solve a computational puzzle (Proof of Work) to earn the right to add the next block. On Ethereum, validators stake ETH (Proof of Stake) to propose and attest blocks.
Why decentralization matters
A database controlled by one company can be altered, censored, or taken offline. Blockchain nodes are spread across thousands of independent operators globally — there is no single point of failure or control. To alter the Bitcoin ledger, an attacker would need to control more than half of the network's total computational power.
Scalability and Layer 2
The security guarantees of a blockchain come with throughput limits. Ethereum processes roughly 15–30 transactions per second on its base layer (Layer 1). To scale without sacrificing security, the ecosystem developed Layer 2 networks like Polygon that batch transactions and settle proofs back to Ethereum.
Smart contracts running on a blockchain enable programmable financial applications — from DeFi protocols to NFT marketplaces to DAOs.
Blockchain projects on ChainClarity
- Bitcoin — the original blockchain, optimized for value transfer
- Ethereum — programmable blockchain, home of DeFi and smart contracts
- Polygon (POL) — Ethereum Layer 2 scaling network
- Chainlink — oracle network connecting blockchains to real-world data
- Aave — DeFi lending built on Ethereum and Polygon
Browse by Layer 1 or Layer 2 to compare blockchain architectures.
Frequently asked questions
What is a blockchain in simple terms?
A blockchain is a database that is simultaneously maintained by thousands of computers worldwide, with each new batch of data (a block) cryptographically linked to the previous one. Because every participant holds a copy and the history cannot be altered without redoing all subsequent blocks, it is effectively tamper-proof. No single company or government controls it.
How do new blocks get added?
New blocks are added through a consensus mechanism — a set of rules all participants agree on. Bitcoin uses Proof of Work: miners compete to solve a computationally hard puzzle, and the winner adds the next block and earns the block reward. Ethereum uses Proof of Stake: validators are chosen to propose blocks based on the amount of ETH they have locked up as collateral.
Why is a blockchain immutable?
Each block contains the cryptographic hash (fingerprint) of the previous block. Changing any historical transaction would change that block's hash, breaking the link to the next block. To rewrite history, an attacker would need to redo all subsequent blocks faster than the honest network — which for Bitcoin requires controlling over 50% of the global mining hashrate, an astronomically expensive attack.
What is the blockchain trilemma?
The blockchain trilemma (coined by Vitalik Buterin) states that a blockchain can only optimize for two of three properties simultaneously: decentralization, security, and scalability. Bitcoin maximizes security and decentralization at the cost of throughput. Layer 2 solutions like Polygon attempt to scale Ethereum by processing transactions off the main chain while inheriting its security.
What is the difference between Layer 1 and Layer 2?
A Layer 1 is the base blockchain (Bitcoin, Ethereum). A Layer 2 is a separate network built on top that processes transactions faster and cheaper, then settles batches back to Layer 1 for security. Layer 2s trade some decentralization assumptions for dramatically higher throughput. See the full definitions: Layer 1 and Layer 2 glossary entries.