In recent years, the conventional power grid system has been streamlined towards Smart grid infrastructure that empowers two-way communication between the consumers and the utility providers. This however also makes the grid more susceptible towards faults as well as physical and cyber attacks. In this work, we propose a Physically Unclonable Function (PUF) and Blockchain based detection and prevention mechanism to secure the Smart grid system against such faults and adversarial threats. In this context, we discuss a recently proposed Manipulation of demand via IoT (MadIoT) attacks, False Data Injection Attacks (FDIA) via Smart meters and Electric Fault Attacks (EFA) on Smart grid which can lead to localized blackout, falsified load forecasting, imbalance in demand-response, generator tripping, frequency instability and loss of equipment. To detect these threats and to trace back to the source of such attacks, we inspect the potential of the promising blockchain technology which gives a mechanism to authenticate and ensure the integrity of real power consumption information. However, the blockchain needs to be augmented with a root-of-trust, to bind the Smart meter with a unique hardware fingerprint. This can be achieved through Physically Unclonable Functions (PUFs) which is considered to be an unconventional cryptographic primitive and used for keyless authentication. The proposed PUF based authentication scheme would further prevent the system from injection of any false data by an illegitimate Smart meter that aids to false power estimation. The novelty of the proposed work is to blend these two technologies in developing a robust and secure framework which detects and prevents all of the above mentioned security vulnerabilities and can be easily integrated with the Smart grid infrastructure. Finally an end-to-end demonstration of the attack has been presented using MATLAB and Power World simulator and the proposed framework has been prototyped using commercial off-the-shelf products such as Raspberry Pi and Artix 7 FPGA along with an in-house blockchain simulator.