4.2[Blockchain Technology](https://wealtii.com/learn) # How Does Blockchain Work? Step-by-Step Guide By [Zayd Ahmed](https://wealtii.com/editorial-policy#zayd-ahmed), Founder & CEO, Wealtii · Published 12 February 2026 · Last reviewed 21 October 2026 A **blockchain works** by having users sign transactions with a private key, broadcasting them to a peer-to-peer network and letting every node check them against shared rules. Valid transactions are batched into a block that points to the previous block's hash, and a consensus mechanism decides which block all nodes add next. If you are new to the topic, start with [what a blockchain is and why it exists](https://wealtii.com/learn/what-is-blockchain). This guide follows a single transaction from your wallet to a finalised block. ## What happens when you send a blockchain transaction? 1. **Create and sign:** Your wallet builds a message such as "send 100 USDT from address A to address B" and signs it with your private key. The digital signature proves the owner approved it; the key itself never leaves the wallet. 2. **Broadcast:** The wallet sends the signed transaction to one or more nodes, which relay it across the peer-to-peer network. 3. **Validate:** Every node independently checks the signature, that the sender has enough funds, and that the same coins have not already been spent. Invalid transactions are dropped. 4. **Wait in the mempool:** Valid but unconfirmed transactions sit in each node's memory pool. Block producers usually pick the transactions paying the highest fees first. On Ethereum, the base fee is burned and the tip goes to the validator. 5. **Build a block:** A miner or validator assembles a candidate block: a header that references the previous block's hash, plus the selected transactions. 6. **Reach consensus:** The consensus mechanism decides whose block is accepted: the first valid Proof of Work on Bitcoin, or the block from the pseudo-randomly chosen proposer that gathers validator votes on Ethereum. 7. **Confirm and finalise:** Nodes re-verify and append the block. Each later block adds a confirmation, and some networks also mark blocks as final once enough validators have voted for them. ## What is inside a block? A block has two parts: a header and a list of transactions. A Bitcoin block header is only 80 bytes and contains six fields: - **Version** of the block rules being followed. - **Previous block hash**, the link that chains blocks together. - **Merkle root**, a single hash that summarises every transaction in the block. - **Timestamp** of when the miner started hashing the header. - **Difficulty target** the header hash must fall below. - **Nonce**, the number miners change to search for a valid hash. Ethereum blocks have more fields, including a state root that commits to every account balance and contract's storage, but the principle is the same: the header commits to the block's transactions and to the block before it. ## How fast do major blockchains confirm transactions? | Network | Target block time | When a transaction is usually treated as settled | | --- | --- | --- | | Bitcoin | About 10 minutes | Six confirmations (roughly an hour) is a common benchmark; finality is probabilistic. | | Ethereum | 12-second slots | A block is finalised after about 15 minutes, once two-thirds of staked ETH has voted for it. | | BNB Smart Chain | 0.45 seconds since the Fermi hard fork (14 January 2026) | Finalises within two blocks in most cases, according to BNB Chain documentation. | ## How does hashing make a blockchain tamper-evident? A cryptographic hash function such as SHA-256, which Bitcoin uses, turns any input into a fixed-length output. Change one character of the input and the output changes completely, and there is no practical way to work backwards from an output to its input. Because each block header contains the previous header's hash, the blocks form a chain. Editing an old transaction changes its block's Merkle root and hash, which no longer matches the reference stored in the next block. To hide the edit, an attacker would have to rebuild every later block faster than the rest of the network. [NIST IR 8202](https://doi.org/10.6028/NIST.IR.8202) notes that the cost of such an attack rises the further back the change is. Blockchain history is still not absolutely fixed. In July 2016 the Ethereum community adopted a hard fork to return more than 3.6 million ETH drained from The DAO; participants who rejected it kept the original chain running as Ethereum Classic. ## How do private keys prove who owns what? Blockchains use public-key cryptography. A private key is a secret number, and the public key and address are derived from it. Signing a transaction with the private key produces a signature that anyone can check against the public key, yet nobody can work out the private key from the signature. Whoever holds the private key controls the funds, which is why [protecting private keys and seed phrases](https://wealtii.com/learn/private-keys-and-seed-phrases) matters more than any other security step. ## How do nodes agree on one version of the ledger? Thousands of nodes cannot vote on every transaction in real time, so blockchains use a consensus mechanism to pick the next block. In Proof of Work, nodes follow the valid chain with the most accumulated work. In Ethereum's Proof of Stake, validators vote on blocks, and finality requires votes representing two-thirds of the staked ETH. Our overview of [consensus mechanisms from PoW to BFT](https://wealtii.com/learn/blockchain-consensus-mechanisms) compares the options, and the guide to [how new blocks are added](https://wealtii.com/learn/how-blocks-are-added) walks through mining and validation in detail. ## What does this mean for everyday users? - **Payments are hard to reverse.** Bitcoin.org notes that confirmed transactions can only be refunded by the person who received them. Check the address and the network before sending. - **Fees change with demand.** Block space is limited, so fees rise when many users compete for the next block. - **Code applies the rules.** On programmable chains, [smart contracts](https://wealtii.com/learn/smart-contracts-explained) run the same checks for every user, with no operator able to make exceptions. **Example from Wealtii:** when you deposit USDT on BNB Smart Chain (BEP-20) to your personal Wealtii deposit address, the deposit is credited after 12 block confirmations. Fund assets are held in a 3-of-3 multi-signature vault with a public address, so you can check its holdings on BscScan via [Wealtii's transparency page](https://wealtii.com/transparency). ## Frequently Asked Questions ### How does blockchain work step by step? A user signs a transaction and broadcasts it to the network, where nodes check it. Valid transactions wait in the mempool until a miner or validator includes them in a block. The consensus mechanism decides which block is accepted, every node appends it, and later blocks add confirmations. ### What makes a blockchain tamper-evident? Each block header contains the hash of the previous block. Changing an old transaction changes that block's hash and breaks every link after it, so an attacker would have to rebuild all later blocks faster than the honest network. ### Who validates blockchain transactions? Every full node checks every transaction against the protocol rules. Miners (in Proof of Work) or validators (in Proof of Stake) then package valid transactions into blocks and are paid through block rewards and transaction fees. ### How long does a blockchain transaction take to confirm? It depends on the network. Bitcoin adds a block about every 10 minutes and six confirmations is a common benchmark. Ethereum finalises blocks after about 15 minutes. BNB Smart Chain targets 0.45-second blocks and usually finalises within two blocks. ## Sources & References 1. [Bitcoin Developer Guide — Block Chain](https://developer.bitcoin.org/devguide/block_chain.html) (accessed 21 Oct 2026) 2. [bitcoin.org — Frequently Asked Questions (confirmations, irreversibility)](https://bitcoin.org/en/faq) (accessed 21 Oct 2026) 3. [ethereum.org — Gas and fees](https://ethereum.org/en/developers/docs/gas/) (accessed 21 Oct 2026) 4. [ethereum.org — Single-slot finality (current finality time)](https://ethereum.org/en/roadmap/single-slot-finality/) (accessed 21 Oct 2026) 5. [BNB Chain Docs — BNB Smart Chain introduction](https://docs.bnbchain.org/bnb-smart-chain/introduction/) (accessed 21 Oct 2026) Disclaimer: This content is for educational purposes only and does not constitute financial, tax, or legal advice. Digital assets are volatile and carry risk of loss. Wealtii is early-stage and is not regulated by any financial authority. ## Further reading from official sources - [NIST: Blockchain Technology Overview](https://csrc.nist.gov/pubs/ir/8202/final) - [Bitcoin white paper](https://bitcoin.org/bitcoin.pdf) [Zayd Ahmed](https://wealtii.com/editorial-policy#zayd-ahmed) Founder & CEO, Wealtii Computer Science Engineer | 5+ Years in DeFi & Digital Assets