What Is a Blockchain? A Simple Guide to Public and Private Chains

What Is a Blockchain?

A blockchain is a sequential chain of blocks where each block stores data and a cryptographic hash derived from that data. Every block also contains the hash of the previous block, so any alteration to an earlier block changes its hash and breaks the chain, making tampering evident.

Hashes act as unique fingerprints; the network of computers that store copies of the blockchain collectively validates the longest, majority‑agreed version, preventing a single party from rewriting history.

Public Blockchains

Public blockchains such as Bitcoin and Ethereum are open to anyone. Bitcoin functions as a digital currency and a payment system, recording all transactions in an immutable ledger. Miners contribute computing power and receive newly minted bitcoins as a reward. Ethereum extends this model by allowing developers to deploy arbitrary code (smart contracts) on the chain; executing these contracts consumes significant computational resources.

Private Blockchains

Private blockchains restrict participation to known parties. They can enforce business rules automatically through smart contracts. For example, a contract could encode the rule: on the 30th of each month, if rent is unpaid, transfer $500 from the tenant’s account to the landlord’s account. The contract is deployed to the computers of all participants (e.g., the banks of the involved parties), ensuring automatic execution without court involvement.

if today == 30th and rent not paid then
    transfer 500 from Mark's account to Sara's account

When the contract runs each month, the specified amount is moved automatically, eliminating manual collection and reducing legal disputes. Only the parties involved in the specific business process belong to the private network; unrelated participants are excluded.

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