Five ideas carry the whole thing: a hash, a key, a chain of blocks, a rule for who adds the next block, and a token that stands for something else. Each has a working model below.
1 · A hash a fingerprint for any data
SHA-256 turns any input into 256 bits. Change one character and about half the bits flip, with no pattern a person or a computer can use to go backwards. Bitcoin names blocks and transactions by their hashes.[492]
2 · A key a number only you know
A wallet is a large random number, the private key. Multiplying a fixed point on a curve by that number gives the public key; hashing the public key gives the address. Going forward takes microseconds; going back from address to key has no known method short of guessing among 2256 possibilities. The twelve or twenty-four words of a seed phrase encode that number. Anyone holding the words holds the coins.
3 · A chain each block names the one before it
A block holds transactions and the hash of the previous block. Change an old transaction and that block's hash changes, which breaks the next block's reference, and every block after it.
4 · Who adds the next block
Proof of work (bitcoin): whoever first finds a number that makes the block's hash start with enough zeros. The only way is to try. Try it here: each extra zero multiplies the average tries by 16.
Proof of stake (Ethereum since September 2022): validators lock up coins, the protocol picks one to propose each block, and a validator that cheats loses part of its stake.
5 · A token that stands for something
A stablecoin is a token whose issuer holds reserves (cash, short Treasury bills) and redeems tokens for dollars. USDT (Tether) and USDC (Circle) are the two largest; together 83% of the $312 billion in circulation. The token is only as good as the issuer's reserves and its willingness to redeem; an issuer can also freeze tokens at an address, and does, at police request.[4]
The 21 million
Bitcoin's reward started at 50 coins per block and halves every 210,000 blocks, about four years. The sum of that series is 20,999,999.97690000 coins; the last fraction arrives around 2140.[493]