Track 1 · Foundations · Module 2

How a blockchain works

Hashes, blocks, nodes and how strangers agree on one history.

Lessons: 6
Reading: 36 min
Quiz: 15 questions
Pass mark: 80%

The case used in this module

The Brindlecove Labs case (made up)

Brindlecove Labs is a made-up company with a made-up token, BRDL, on Ethereum. Its made-up finance lead, Maya Quist, wants to know what really happens when Brindlecove sends or receives money on a blockchain.

The agreement. Brindlecove keeps the SHA-256 hash of its signed agreement with Brackenlow Design, a made-up supplier, so it can prove later that the file has not changed.
The payment. Brindlecove pays Brackenlow Design 50,000 BRDL on Ethereum. Maya waits until the block is finalised, about 15 minutes, before she closes the books.
The customer. A made-up customer pays Brindlecove 0.5 BTC on Bitcoin. Maya waits for six confirmations, about an hour.
The node. Brindlecove runs its own full node, so it can check its payments itself.
The stake. Brindlecove deposits 64 ETH and runs two validators of 32 ETH each.

The lessons come back to Brindlecove, and some quiz questions ask about it.

Each module tells its own made-up Brindlecove story, so details can differ from one module to the next.

Key words

Hash function: A function that turns data of almost any size into a short code of fixed length, called a digest.¹²
SHA-256: A hash function from a US standard, FIPS 180-4. Its digest is 256 bits long. Bitcoin uses it.²³
Block: A batch of transactions plus a header that describes it, including the hash of the block before.²
Genesis block: The first block in a blockchain. It has no block before it.²
Node: A computer in a blockchain network that runs the network's software and connects to other nodes.²⁴
Full node: A node that stores the blockchain and checks that transactions and blocks are valid.²⁵
Nonce: A number used only once. In proof of work, miners change it to get a new hash.²
Proof of work: A way to agree on new blocks: the first computer to solve a hard guessing puzzle adds the next block.²
Proof of stake: A way to agree on new blocks: users lock up coins, and their chance of adding a block depends on their share of the stake.²⁶
Validator: On Ethereum, a user who has deposited at least 32 ETH and runs software to check and propose blocks.⁶⁷
Confirmation: On Bitcoin, a transaction gains one confirmation for each block, starting with the block that includes it.⁸
Finality: The point at which a transaction is in a block that can no longer change.⁹¹⁰

Sources

Hash Functions (project page). US National Institute of Standards and Technology, Computer Security Resource Center.
NIST IR 8202: Blockchain Technology Overview. US National Institute of Standards and Technology (Yaga, Mell, Roby, Scarfone), October 2018.
FIPS 180-4: Secure Hash Standard (SHS). US National Institute of Standards and Technology, August 2015.
Nodes and clients. ethereum.org developer docs, page updated 13 July 2026.
Running a full node. Bitcoin Project, bitcoin.org.
Proof-of-stake (PoS). ethereum.org developer docs, page updated 7 October 2026.
Pectra MaxEB. ethereum.org roadmap, page updated 16 July 2026.
Bitcoin developer guide: Payment processing (verifying payment). Bitcoin developer documentation (developer.bitcoin.org).
Proof-of-work (PoW). ethereum.org developer docs, page updated 13 April 2026.
Gasper. ethereum.org developer docs, page updated 3 April 2026.