Blockchain definition: A decentralized and distributed ledger technology used to record transactions across multiple computers so that any involved record cannot be altered retroactively, without the alteration of all subsequent blocks. This allows the participants to verify and audit transactions without the need for a centralized authority.

Blockchain technology was first outlined in 1991 by Stuart Haber and W. Scott Stornetta, two researchers who wanted to implement a system where document timestamps could not be tampered with. However, it went largely unused until it was adapted by Satoshi Nakamoto in 2008 to create the peer-to-peer digital cash system known as Bitcoin.

Blockchains are secure by design and are an example of a distributed computing system with high Byzantine fault tolerance. This makes blockchains potentially suitable for the recording of events, medical records, identity management, transaction processing, and documenting provenance.

The blockchain is made up of a series of blocks, each containing data. The data in these blocks depend on the type of blockchain. For example, the Bitcoin blockchain records the details of the financial transactions like the sender, receiver, and amount of coins. A block also has a hash, which you can compare to a fingerprint. It identifies a block and all of its contents and it's always unique, just like a fingerprint.

The world's most recognized and high-profile blockchain is Bitcoin. Introduced in 2009, Bitcoin offers the promise of lower transaction fees than traditional online payment mechanisms and, unlike government-backed currencies, it is operated by a decentralized authority.

There are various types of blockchains, including public, private and consortium blockchains. Public blockchains such as Bitcoin and Ethereum allow anyone to join or leave at any time. In contrast, private blockchains like Hyperledger and R3 are permissioned networks where entry is controlled.

Blockchain technology has the potential to disrupt many industries by making processes more democratic, secure, transparent, and efficient. Its potential applications include fund transfers, settling trades, voting, and many other issues of a financial, political, and social nature.

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Michelle Legge
By Michelle LeggeHead of Crypto Tax Education
Updated Nov 9, 2023
This article has been fact checked and reviewed as per our editorial policy.