A blockchain is a decentralized and distributed digital ledger that plays a crucial role in processing cryptocurrency transactions. It records all transactions across a network of computers in a way that is secure, transparent, and immutable.

When a cryptocurrency transaction is initiated, it is grouped with other transactions into a "block." This block is then broadcast to a network of nodes (computers) for validation. Each node verifies the transaction using a consensus mechanism, such as Proof of Work (PoW) or Proof of Stake (PoS), ensuring that the sender has the necessary funds and that the transaction is legitimate.

Once validated, the block is added to the existing chain of blocks, hence the term "blockchain." Each block is cryptographically linked to the previous one, making it extremely difficult to alter or tamper with the transaction data without affecting the entire chain. This provides a high level of security and trust.

The decentralized nature of blockchain means that no single entity controls the ledger, reducing the risk of fraud and censorship. Additionally, because the blockchain is transparent and publicly accessible, anyone can verify transactions, enhancing trust and accountability in the cryptocurrency ecosystem.