Understanding Blockchain: What It Is and How It Works

Blockchain has become one of the most discussed technologies in fintech and online services since the end of 2017, prompting the question of what it actually is and how it functions.

In a 2016 TED Talk, senior business strategist Don Tapscott declared that blockchain has arrived and will shape the future, emphasizing that it is not social media, big data, robotics, or AI, but the foundational technology behind digital currencies like Bitcoin.

Blockchain is a distributed peer‑to‑peer ledger that records transactions and assets across a business network. While it is best known as the underlying network for Bitcoin transactions, it can track any item of intrinsic value, including money, property, patents, and copyrights. It was created by the anonymous Bitcoin founder Satoshi Nakamoto, and the Bitcoin blockchain is just one of many existing blockchains.

Today’s most popular blockchain protocols include the Ethereum network, the Ripple transaction protocol, and R3’s platform.

The network operates by linking data blocks in a chain; each block contains a hash (a digital fingerprint) and a timestamp batch of recent transactions. These blocks are cryptographically linked to prevent external tampering and to strengthen verification during asset movement. Every record on the ledger has a unique key, which cryptographers consider a major upgrade over traditional ledgers.

For example, shipping giant Maersk became one of the first companies in March 2017 to adopt blockchain technology in partnership with IBM, using it to simplify multi‑signature cargo shipments and reduce paperwork. Blockchains can also support smart contracts that automatically execute scripts when predefined conditions are met.

Technically, blockchains fall into two main categories: public blockchains, which are part of open consensus protocols and allow anyone to view and send transactions, and private blockchains, which restrict write access to a single company or a consortium of enterprises.