How Public Blockchains Work (Bitcoin, Ethereum)
A blockchain is an append-only ledger replicated across many machines, with each block cryptographically linked to its predecessor.
Each block contains a hash of the previous one, so altering an old block changes its hash and breaks every link after it. Rewriting history means redoing all subsequent work, which becomes prohibitive as the chain grows.
Bitcoin and Ethereum are built for different things
Bitcoin does one thing: transfer value, securely and censorship-resistantly. Its scripting is deliberately limited, which reduces the surface for bugs.
Ethereum adds smart contracts: programs that execute on-chain. This enables decentralised exchanges, lending protocols and everything else in DeFi, at the cost of a much larger attack surface. Most large crypto hacks are smart contract exploits rather than breaks of the underlying chain.
The operational facts that matter for trading
Block time determines settlement speed. Bitcoin targets 10 minutes, Ethereum around 12 seconds. If you are moving collateral between exchanges to meet a margin call, this is a real constraint.
Finality is probabilistic on proof-of-work. A transaction becomes progressively harder to reverse as blocks accumulate on top, which is why exchanges require a number of confirmations before crediting a deposit. Proof-of-stake chains offer stronger finality guarantees after a defined period.
Fees vary with congestion. During busy periods, transaction costs spike, and this is exactly when everyone wants to move funds. Any strategy relying on rapid transfers between venues must price this in.
Everything is public. Every transaction is visible, so large movements between known wallets are observable and traded on.
Transfer time and finality set the speed at which capital can move between venues. That constraint is why cross-exchange arbitrage in crypto requires pre-positioned capital on every venue rather than moving funds to the opportunity.
MEV, briefly
Because transactions sit publicly in a queue before inclusion, whoever orders them can profit: front-running a large pending swap, or sandwiching it between two of their own trades.
This is maximal extractable value, and it is the on-chain analogue of latency arbitrage in traditional markets. The mechanism differs, the economics are familiar, and it is a significant business.
The scaling constraint
Requiring every node to process every transaction bounds throughput. Bitcoin manages single-digit transactions per second, Ethereum a few dozen, against tens of thousands for a card network.
Layer 2 networks address this by processing off-chain and settling back periodically, inheriting the base layer's security while raising throughput.