A blockchain is a distributed, append-only ledger in which records are grouped into blocks that are cryptographically linked, so past entries cannot be changed without detection.
How a blockchain works
Each block contains a batch of transactions, a timestamp and the cryptographic hash of the previous block. Changing an old record would alter its hash and break every later link. Copies of the ledger are kept by many independent nodes, which agree on new blocks through a consensus mechanism:
- Proof of work – miners compete to solve computational puzzles (Bitcoin);
- Proof of stake – validators lock up coins as collateral; Ethereum switched to it in 2022.
Platforms such as Ethereum also run smart contracts – programs stored on the chain that execute automatically and hold funds.
Why blockchain matters for security
Blockchains underpin cryptocurrencies, but their security guarantees are narrower than often assumed:
- Smart contract bugs – in 2016 a reentrancy flaw in The DAO let an attacker drain about 3.6 million ether, leading to the Ethereum hard fork. Cross-chain bridges such as Ronin and Wormhole lost hundreds of millions of dollars in 2022.
- 51% attacks – whoever controls most of the mining or staking power can rewrite recent history; smaller networks such as Ethereum Classic suffered such attacks in 2020.
- Abuse by malware – the Glupteba botnet read backup command-and-control addresses from Bitcoin transactions, and the EtherHiding technique (2023) stores malicious scripts in smart contracts, making them hard to take down.
Most real losses happen off-chain: stolen keys from a crypto wallet, compromised exchanges and phishing.
Best practices
- Have smart contracts independently audited and use bug bounties before deployment.
- Protect signing keys with hardware wallets, multi-signature schemes and HSMs.
- Remember that immutability also means stolen funds and mistakes usually cannot be reversed.
