How Blockchain Works
Every blockchain operates as a cycle: transactions are created, grouped into blocks, validated through consensus, and appended to a chain. Understanding this lifecycle reveals why blockchains are so resilient.
The Lifecycle of a Block
Step 1: TRANSACTION CREATION
┌──────────────────────────────────────┐
│ User A sends 2 ETH to User B │
│ Transaction includes: │
│ - Sender address │
│ - Recipient address │
│ - Amount │
│ - Digital signature (proof of auth) │
│ - Gas fee │
└──────────────────────────────────────┘
│
▼
Step 2: POOL OF PENDING TRANSACTIONS
┌──────────────────────────────────────┐
│ ┌─────┐ ┌─────┐ ┌─────┐ ┌─────┐ │
│ │ T1 │ │ T2 │ │ T3 │ │ T4 │ │
│ └─────┘ └─────┘ └─────┘ └─────┘ │
│ Transactions wait to be picked up │
└──────────────────────────────────────┘
│
▼
Step 3: BLOCK CREATION
┌──────────────────────────────────────┐
│ Block #12,345 │
│ ┌────────────────────────────────┐ │
│ │ Previous Hash: 0x8a3f... │ │
│ │ Timestamp: 2026-07-04 12:00 │ │
│ │ Merkle Root: 0xb7c1... │ │
│ │ Nonce: 0 │ │
│ │ Transactions: [T1, T2, T3] │ │
│ └────────────────────────────────┘ │
└──────────────────────────────────────┘
│
▼
Step 4: CONSENSUS VALIDATION
┌──────────────────────────────────────┐
│ Nodes verify: │
│ - Valid signatures │
│ - Sufficient balance │
│ - Correct block format │
│ - Valid proof (PoW or PoS) │
│ If consensus reached → block added │
└──────────────────────────────────────┘
│
▼
Step 5: BLOCK APPENDED TO CHAIN
┌──────────────────────────────────────┐
│ Block #12,344 ──► Block #12,345 │
│ Hash: 0x8a3f Hash: 0x5d2e │
│ (contains prev) │
└──────────────────────────────────────┘
How Blocks Link Together
Each block contains the hash of the previous block. Changing any data in an old block changes its hash, which breaks the link to the next block, which breaks the next, and so on. This chain of hashes is what makes the ledger tamper-evident.
Block N-2 Block N-1 Block N
┌──────────┐ ┌──────────┐ ┌──────────┐
│Data │ │Data │ │Data │
│Prev Hash │ │Prev Hash │ │Prev Hash │
│ 0x7e2a │ │ 0x9c4f │ │ 0x5d2e │
│Hash │ │Hash │ │Hash │
│ 0x9c4f │◄───────│ 0x5d2e │◄───────│ 0x1b8a │
└──────────┘ └──────────┘ └──────────┘
Each block's hash is stored in the next block
Transaction Confirmation
A transaction is considered more secure as more blocks are added after it. In Bitcoin, 6 confirmations (6 blocks mined on top) is considered secure. In Ethereum, finality is achieved differently through its Proof of Stake mechanism.