Glossary
Blockchain: a shared record that is hard to alter
A blockchain records who sent what to whom. It does not decide whether a coin is a good investment, and a record built to be hard to change is also hard to correct when you make a mistake.
A blockchain is a digital record of transactions grouped into blocks, where each block carries a fingerprint of the block before it. Copies are spread across many computers, so changing an old entry is easy to detect and hard to get accepted.
Quick answer
A blockchain is a tamper-evident, tamper-resistant digital ledger kept in a distributed way, usually without a central authority [1]. Each block includes a hash of the previous one, so changing an old block breaks every link after it.
Key points
- NIST's definition: a tamper-evident and tamper-resistant digital ledger, distributed and usually without a central authority [1].
- Changing one old block changes its hash and breaks every later block's link [1].
- Tamper-resistant is not tamper-proof, and a record that is hard to change also makes your own mistakes hard to reverse.
On this page
What is a blockchain in simple terms?#
Think of a notebook of payments that many people keep identical copies of. New lines are written in batches called blocks. The US National Institute of Standards and Technology (NIST) defines blockchains as tamper evident and tamper resistant digital ledgers implemented in a distributed fashion, usually without a central authority [1].
The Bitcoin whitepaper describes the core trick. Each timestamp includes the previous timestamp in its hash, forming a chain, with each new one reinforcing the ones before it [2]. A hash is a short fingerprint that a computer calculates from any piece of data. Change the data by one character and the fingerprint changes completely.
Regulators use a broader term, distributed ledger technology (DLT). The FCA describes DLT as a system for storing and managing information distributed across participants in a network [3], and a blockchain is one kind of it. Bitcoin and Ethereum each run their own blockchain.
Why is a blockchain hard to change?#
Because every block points back to the one before it. NIST explains that if a previously published block were changed, it would have a different hash, and that in turn would cause all subsequent blocks to have different hashes too [1]. Anyone comparing copies can see the break.
On Bitcoin, rewriting history also means redoing work. The whitepaper says transactions are hashed into a chain of proof-of-work, forming a record that cannot be changed without redoing the proof-of-work [2]. For each extra block added after a transaction, the chance that an attacker catches up drops exponentially [2].
| Block | Hash before the edit | Hash after editing block 1 |
|---|---|---|
| Block 1 | 0f6a0c70 | 1f222cb4 |
| Block 2 | 33e2145c | a0aa015c |
| Block 3 | 643e3928 | cce16c24 |
Hashes from the worked example above, SHA-256 shortened to 8 characters (calculated). The linking idea follows NIST [1].
Who can add blocks to a blockchain?#
It depends on the type. NIST separates two kinds. Permissionless blockchains are open to anyone publishing blocks without needing permission from any authority [1]. Permissioned blockchains are ones where the users publishing blocks must be authorized by some authority [1].
How the publisher is chosen also varies. Bitcoin uses proof of work, and NIST notes it adjusts the puzzle difficulty every 2016 blocks to keep publication near one block every ten minutes [1]. Ethereum moved from proof of work to proof of stake in 2022, where validators lock ETH as a security deposit for the right to process transactions [4].
Frequently asked questions#
Is a blockchain the same as Bitcoin?
No. Bitcoin is one cryptocurrency that runs on its own blockchain. The blockchain is the record; the coin is what the record tracks. Our guide to what Bitcoin is explains the coin itself.
Can a blockchain be hacked?
Do I need to understand blockchains to buy crypto?
Knowing the basics helps you see what a transaction is and why it is hard to reverse. It does not tell you whether a coin is worth buying. Start with what a blockchain actually records.
The bottom line#
A blockchain is a shared record that makes tampering easy to spot and hard to push through. That is useful for keeping track of who owns what, and it says nothing about price. Read the full explainer on what a blockchain records and the risk disclosure before you buy any crypto.
Sources
- NISTIR 8202 - Blockchain Technology Overview.
- Bitcoin: A Peer-to-Peer Electronic Cash System.
- Crypto: The basics | FCA (InvestSmart).
- What is Ethereum? | ethereum.org.
- Exchange-Traded Products (ETPs) Providing Exposure to Bitcoin and Ether - Investor Bulletin.
- Exercise Caution with Crypto Asset Securities: Investor Alert.
Education only. This page is not investment, tax or legal advice. Trading and crypto can lose you money. See our risk disclosure.
