Blockchain Basics

What is a Blockchain?

A blockchain is a digital ledger — a record of transactions — that's shared across a network of computers. Instead of one central authority (like a bank) keeping the records, thousands of computers around the world each maintain an identical copy.

This makes blockchains:

Decentralised — no single point of failure or control
Transparent — anyone can verify any transaction
Immutable — once recorded, transactions can't be altered
Permissionless — anyone can participate without approval

How Transactions Work

When you send cryptocurrency (say, Bitcoin) to someone:

You Sign a Transaction

Your wallet creates a transaction that says "send X amount to address Y" and signs it with your private key. This proves you authorised it.

Network Propagation

The signed transaction is broadcast to the network. Thousands of nodes receive it and add it to their pool of pending transactions (the "mempool").

Block Inclusion

A validator (or miner) selects pending transactions and groups them into a block. The block is added to the chain.

Confirmation

Once included in a block, the transaction is considered confirmed. Additional blocks built on top provide further confirmation, making it increasingly difficult to reverse.

Consensus Mechanisms

Different blockchains use different methods to agree on which transactions are valid:

Proof of Work (PoW)

Used by Bitcoin, Litecoin, Dogecoin. Miners compete to solve computational puzzles. The winner adds the next block and earns a reward. Secure but energy-intensive.

Proof of Stake (PoS)

Used by Ethereum, Cosmos, Avalanche, BNB Chain. Validators lock up (stake) tokens as collateral. They're selected to create blocks based on their stake. More energy-efficient than PoW.

Other Mechanisms

Some chains use variations like Delegated Proof of Stake (DPoS), Proof of Authority, or Proof of Liquidity (Berachain). The core idea is the same — a decentralised way to agree on the state of the ledger.

Block Time and Confirmations

Each blockchain produces blocks at a different rate:

| Chain | Block Time | Notes | |-------|-----------|-------| | Bitcoin | ~10 minutes | Slowest but most secure | | Ethereum | ~12 seconds | Much faster than BTC | | BNB Chain | ~3 seconds | Fast finality | | Avalanche | ~2 seconds | Near-instant finality | | Cosmos/THORChain | ~6 seconds | Fast with Tendermint consensus |

Block time directly affects how long your transactions take. This is why Bitcoin swaps take longer than Ethereum swaps — it's not Swaptain, it's the blockchain itself.

Confirmations are the number of blocks added after the block containing your transaction. More confirmations = more security. Different services require different confirmation counts:

Bitcoin: typically 1-3 confirmations (10-30 minutes)
Ethereum: typically 1-2 confirmations (12-24 seconds)
Most other chains: 1 confirmation (seconds)

Why Does This Matter for Trading?

Understanding blockchains helps you:

Expect realistic timing — a BTC to ETH swap requires confirmations on both chains
Understand fees — gas fees are paid to the network, not to Swaptain
Avoid mistakes — each chain is separate; sending to the wrong chain means lost funds
Evaluate security — more decentralised chains are generally more secure but slower

Different Types of Blockchains

Layer 1 (L1)

The base blockchain — Bitcoin, Ethereum, Avalanche, Cosmos. These are independent networks with their own consensus and security.

Layer 2 (L2)

Built on top of a Layer 1 for faster and cheaper transactions. Examples: Arbitrum, Optimism, Base (all built on Ethereum). They inherit the security of the underlying L1.

Sidechains

Independent chains connected to a main chain. BNB Chain and Polygon operate as their own networks but have bridges to Ethereum.

Swaptain supports all of these types — L1s, L2s, and sidechains — through a unified interface.