Blockchain is a shared ledger in which transactions are grouped into blocks, each containing a cryptographic hash of the previous one, so altering an old entry means redoing every later block. Copies are kept by many independent nodes that agree on the contents through a consensus mechanism instead of a central record-keeper: proof of work, where miners solve computational puzzles, or proof of stake, where validators lock up coins as collateral. Public chains such as Bitcoin let anyone take part, while permissioned ledgers admit only approved institutions. Financial uses include crypto-assets, stablecoins, tokenised securities and cross-border settlement. In the EU, MiCA requires crypto-asset service providers to hold CASP authorisation.
How does blockchain work
A user signs a transaction with a private key and broadcasts it to the network. Nodes check the signature and that the sender has the funds. A block producer bundles valid transactions into a block, and the network accepts it under its consensus rules. Because each block's hash depends on the block before, changing an old transaction changes every hash after it, and other nodes reject the altered copy.
Bitcoin targets one block about every 10 minutes and pays the producer a block subsidy that halves every 210,000 blocks. Since the halving at block 840,000 in 2024, the subsidy is 3.125 BTC per block.
Blockchain consensus: proof of work vs proof of stake
Under proof of work, miners compete to solve a computational puzzle, so rewriting history requires more computing power than the honest network. Under proof of stake, validators lock up coins as collateral and lose part of it if they approve conflicting blocks. Ethereum switched from proof of work to proof of stake on 15 September 2022, cutting its energy use by about 99.95%.
Public vs private blockchain and DLT
Public (permissionless) blockchains such as Bitcoin and Ethereum let anyone run a node or submit transactions. Private or permissioned ledgers restrict participation to approved institutions and are used for settlement, trade finance and tokenised securities. DLT is the wider category; a blockchain is one type of DLT that organises data in chained blocks.
Blockchain in finance
The main financial uses are crypto-assets, stablecoins, tokenised deposits and securities, and cross-border settlement. Smart contracts let code release funds when conditions are met, which is the basis of DeFi lending and exchanges.
One illustrative comparison: a correspondent-banking transfer of $100,000 sent on Friday evening may not arrive until Monday, while a dollar stablecoin transfer on a public chain settles in minutes at any hour, with a network fee that can be under $1. The trade-off is counterparty risk on the stablecoin issuer and the AML exposure of transacting on an open network.
Blockchain regulation in the EU
MiCA has applied in full since 30 December 2024, requiring firms offering crypto-asset services to hold a CASP authorisation. Banks face capital rules for crypto exposures: the Basel Committee's cryptoasset standard was set for implementation from 1 January 2026, which sets stricter capital treatment for unbacked crypto-assets than for tokenised traditional assets.
For buyers of crypto businesses, the blockchain itself is rarely the asset. Value sits in the licence, the custody setup, wallet screening controls and the reconciliation between on-chain balances and customer ledgers.