What Is a Block in the Crypto Blockchain, and How Does It Work?

What Is a Block (Blockchain Block)?

Blocks are data structures within the blockchain database, where transaction data in a cryptocurrency blockchain are permanently recorded. A block records some or all of the most recent transactions not yet validated by the network. Once the data are validated, the block is closed. Then, a new block is created for new transactions to be entered into and validated.

A block is thus a permanent store of records that, once written, cannot be altered or removed.

Key Takeaways

  • A block is a place in a blockchain where information is stored and encrypted.
  • Blocks are identified by long numbers that include encrypted transaction information from previous blocks and new transaction information.
  • Blocks and the information within them must be verified by a network before new blocks can be created.
  • Blocks and blockchains are not used solely by cryptocurrencies. They also have many other uses.

How a Block (Blockchain Block) Works

A blockchain network witnesses a great deal of transaction activity. When used in cryptocurrency, maintaining a record of these transactions helps the system track how much was or wasn't used and which parties were involved. The transactions made during a given period are recorded into a file called a block, which is the basis of the blockchain network.

A block stores information. There are many pieces of information included within a block, but it doesn't occupy a large amount of storage space. Blocks generally include these elements, but it might vary between different types:

  • Magic number: A number containing specific values that identify that block as part of a particular cryptocurrency's network.
  • Blocksize: Sets the size limit on the block so that only a specific amount of information can be written in it.
  • Block header: Contains information about the block.
  • Transaction counter: A number that represents how many transactions are stored in the block.
  • Transactions: A list of all of the transactions within a block.

The transaction element is the largest because it contains the most information. It is followed in storage size by the block header, which includes these sub-elements:

  • Version: The cryptocurrency version being used.
  • Previous block hash: Contains a hash (encrypted number) of the previous block's header.
  • Hash Merkle root: Hash of transactions in the Merkle tree of the current block.
  • Time: A timestamp to place the block in the blockchain.
  • Bits: The difficulty rating of the target hash, signifying the difficulty in solving the nonce.
  • Nonce: The encrypted number that a miner must solve to verify the block and close it.

One 32-bit number in the header is called a nonce—the mining program uses random numbers to "guess" the nonce in the hash. When a nonce is verified, the hash is solved when the nonce, or a number less than it, is guessed. Then, the network closes that block, generates a new one with a header, and the process repeats.

Different mechanisms are used to reach a consensus; the most popular for cryptocurrency is proof-of-work (PoW), with proof-of-stake (PoS) becoming more so because of the reduced energy consumption compared to PoW.

Mining's Relationship to Blocks

Mining is the term used for solving the number that is the nonce, the only number that can be changed in a block header. It is also the process the cryptocurrency's network uses if proof-of-work is used in the protocol.

Cryptocurrency mining is commonly thought to be a complex mathematical problem; it is actually a random number generated through hashing. Hashing is the process of encrypting information using the encryption method a cryptocurrency uses. For example, Bitcoin uses SHA256 for its encryption algorithm. For a miner to generate the "winning" number, the mining program must use SHA 256 to hash random numbers and place them into the nonce to see if it is a match.

Solving the random number hash under the proof-of-work protocol is what takes so much energy and computational power. An extensive network of miners and enough energy to power a small country is needed to keep it going.

The difficulty lies in that all previous block headers are encrypted randomly. Hence, the current block header is a randomly generated encrypted number based on the randomly generated encrypted numbers of previous blocks and information from the current block.

Other Block and Blockchain Uses

Because most blockchain definitions refer to Bitcoin because it was the first cryptocurrency to use one, many people associate blocks and blockchains with Bitcoin. However, other cryptocurrencies use blocks and blockchains as well. It's important to note that Ethereum's network has a cryptocurrency called ether that also uses blocks and blockchain.

However, Ethereum and its blockchain were designed for multiple uses that extend to much more than cryptocurrency. For example, non-fungible tokens, smart contracts, decentralized finance applications, and more have been developed using Ethereum.

What Is Blockchain in Simple Words?

A blockchain is a database that stores and encrypts information in a linked fashion, so that previous information cannot be altered, and a group verifies any entries before they are finalized through a consensus—an agreement that the data is correct.

How Is a Blockchain Block Created?

Blocks are created when miners or block validators successfully validate the encrypted information in the blockheader, which prompts the creation of a new block.

What Are Blockchains Used For?

Blockchains are used in cryptocurrency, decentralized finance applications, non-fungible tokens, with more uses constantly under development.

Article Sources
Investopedia requires writers to use primary sources to support their work. These include white papers, government data, original reporting, and interviews with industry experts. We also reference original research from other reputable publishers where appropriate. You can learn more about the standards we follow in producing accurate, unbiased content in our editorial policy.
  1. University of Cambridge Centre for Alternative Finance. "Cambridge Bitcoin energy Consumption Index." Accessed Jan. 9, 2022.

Take the Next Step to Invest
The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.