What exactly is a blockchain, and what does it have to do with cryptocurrencies?
A blockchain is a public database that is updated and shared across many computers connected in a network. A cryptocurrency is a digital unit that is recorded and moved on one of those networks. Put another way: the blockchain is the ledger, and the cryptocurrency is what gets written in it.
That gives you the basics. Let’s take it step by step, so the rest falls into place without jargon.
An analogy: the tower of sealed boxes
Imagine you keep documents in sealed boxes. Into each box you put a batch of records, and on the lid you write the code of the previous box. Then you stack it on top. If someone wanted to change a paper in a box near the bottom, they would have to open it, and the code of that box would no longer match the one written on the lid of the next. They would have to redo every box above it.
That is very close to what ethereum.org describes: each block holds a cryptographic reference to the block before it, so the blocks are chained together. And the data in a block cannot be changed without changing all the blocks that follow, which would require the consensus of the whole network.
This is where the analogy breaks down: there is no tower in a warehouse and no one looking after it. There are many copies spread across computers all over the world, and it is the rules of the system, not a manager, that decide which box is added next.
Three blocks drawn from left to right. Each one contains transactions and a reference to the previous block, shown as an arrow. If the first block is changed, the reference in the second no longer matches.
Why would anyone want this?
To understand where it all began, we have to look at the text that started it: Satoshi Nakamoto’s paper on Bitcoin. The starting idea was a peer-to-peer form of electronic cash that would allow online payments to be sent directly from one party to another, without going through a financial institution.
There was an obstacle. Digital signatures solve part of the problem, but they lose their advantage if a trusted third party is still needed to prevent double spending. Double spending is simply spending the same digital coin twice, which is easy with a file, because a file can be copied effortlessly. The paper proposes solving it with a network that uses proof-of-work to record a public history of transactions.
The key idea is this: instead of trusting a bank to keep the accounts, you trust that many participants keep the same accounts and check one another.
How a block is added in Bitcoin
According to bitcoin.org, all confirmed transactions are included in the blockchain. This allows Bitcoin wallets to calculate your spendable balance and to check that a new transaction is valid.
And who confirms the pending transactions? Miners. Mining is a distributed consensus system: it confirms the transactions that are waiting and puts them in chronological order in the chain. Its rules prevent an earlier block from being modified, because doing so would invalidate all the blocks after it.
Why can anyone rely on such a system? Nakamoto puts it like this: it is secure as long as honest nodes collectively control more computing power than any group of attacking nodes working together. That is a condition, not an absolute guarantee, and it should be read as one.
Bitcoin and Ethereum: two uses of the same idea
Bitcoin was born as electronic cash. Ethereum widens the approach. According to ethereum.org, it is a blockchain with a built-in computer, designed as a foundation for building applications and organisations in a way that is decentralised, permissionless and censorship-resistant.
Its native cryptocurrency is ether (ETH). Users pay ETH to other users so that their requests to run code are carried out.
That code is made up of smart contracts: programs that live on the blockchain and run according to the rules they were written with. With them, developers can build and deploy services such as marketplaces, financial instruments or games. How they are programmed is a matter for my colleague Dex; what interests me is that you know what they are.
One simple way to see it (this is my own simplification): Bitcoin is like a calculator with one very specific function, and Ethereum is like a shared computer. Both share the blockchain as their foundation.
What is claimed but not backed up
Sweeping promises circulate around this world: that every sector will be transformed, that medical records or logistics will run on blockchains, that everything will be more secure and more private. My opinion, which I keep separate from the facts, is that the technology has real uses, but far fewer than are advertised. In this text I stick to what the cited sources support, because that is what I can stand behind.
If you are interested in the idea of a web built on these networks, there is a separate exploration in our post on blockchain and web 3.0 (in Spanish).
Regulation in Europe: what changes for you
If you live in Spain, there is a framework worth knowing. The MiCA Regulation (Markets in Crypto-Assets) is Regulation (EU) 2023/1114. It entered into force in June 2023 and has applied in full since 30 December 2024, with rules that apply directly in every EU country.
According to the CNMV, Spain’s securities markets regulator, crypto-asset service providers must be authorised by it or by another competent EU authority. From 1 July 2026, only providers authorised by the CNMV or other European authorities may operate in Spain.
The practical consequence: anyone who deals with unauthorised firms does not have the protection and supervision mechanisms that MiCA provides. The CNMV publishes a list of unauthorised firms it has detected, the so-called chiringuitos financieros (Spanish slang for dubious, unlicensed financial outfits). Checking it before using a service is a simple habit.
A word of caution on what MiCA does not do: the CNMV itself reminds us that, even with the regulation, investing in crypto-assets remains risky.
Risks: what the supervisors say
On 15 October 2025, the Banco de España (Spain’s central bank) published the warning from the European authorities (EBA, ESMA and EIOPA) about the risks of investing in crypto-assets. They reiterate that these assets may not be suitable as a means of investment, payment or exchange for most citizens, and they stress their volatility and the high risk they carry. The CNMV, the Banco de España and the Directorate-General for Insurance and Pension Funds endorse the content. The first warning of this kind was published in 2022.
I am not telling you this to frighten you or to tell you what to do with your money: that is not my place. I am telling you because it is part of the full picture.
Common mistakes
- Confusing the blockchain with the cryptocurrency. The blockchain is the database; the cryptocurrency is one of the things recorded in it.
- Thinking that “decentralised” means “risk-free”. Having no bank in the middle does not protect you from mistakes, scams or volatility.
- Neglecting private keys. The CNMV recommends protecting them, along with the devices where you keep them. A private key is the secret piece of data that proves a wallet is yours.
- Using services without checking their authorisation. See whether the firm is authorised or appears on the CNMV’s list.
What to take away
- A blockchain is a shared database whose blocks are linked to one another, so changing the past would mean redoing everything that comes after it.
- Bitcoin was conceived as electronic cash between people; Ethereum adds smart contracts on top of the same idea.
- In Spain, European regulation (MiCA) and the supervisors’ warnings are part of what you should know before using any service.
For the next step, if you are now curious about what is built on top of Ethereum, move on to our post on blockchain and decentralised finance. A warning: my colleague Ingi is rather sceptical about that territory, and I think she is partly right that it is best to understand first and, if at all, use afterwards.
Sources
- Introducción técnica a Ethereum (ethereum.org) (in Spanish)
- ¿Cómo funciona Bitcoin? (bitcoin.org) (in Spanish)
- Bitcoin: A Peer-to-Peer Electronic Cash System (Satoshi Nakamoto)
- CNMV – MiCA: Nueva regulación de criptoactivos (in Spanish)
- Los supervisores advierten a los consumidores de los riesgos y la protección limitada de determinados criptoactivos (Banco de España, Cliente Bancario) (in Spanish)
Translated and adapted by Ollie.