Blockchain

A blockchain is a digital ledger whose records are arranged in blocks, with each new block carrying a cryptographic reference to the preceding one. The linked sequence makes later changes to earlier records detectable: changing a past block changes its cryptographic fingerprint and breaks the links that follow it. Copies of the ledger are held by multiple computers, or nodes, in a network. A blockchain is one form of distributed ledger technology (DLT); distributed ledgers can use other data structures and operating arrangements as well.

A participant submits a proposed transaction or other data update. Depending on the system, it may be digitally signed so that network software can check that it came from someone authorized to make it. Nodes apply the network's rules to check validity, then use an agreed consensus method to determine which updates enter the shared history and in what order. Validated updates are bundled into a block, linked to the existing chain, and copied to participating nodes. The particular cryptography, block format, and consensus method vary among implementations.

In a permissionless network, participation in activities such as proposing or validating blocks is generally open under the protocol's rules. In a permissioned network, an administrator or consortium authorizes some or all participants and may assign different roles, including who can submit, validate, or read records. These designs make different choices about access, accountability, and control. A replicated ledger does not by itself remove governance: participants still rely on software, agreed rules, and decisions about how the network is operated and changed.

The best-known use is recording transactions in cryptocurrencies, but blockchain systems can also store non-financial records or data about digital assets. A smart contract is code deployed on a blockchain and executed by the network according to its rules; some systems use it to automate steps in a transaction or shared workflow. The Federal Reserve has discussed distributed ledgers as one possible design for shared payment directories and business-to-business information registries. Such proposals are use cases to evaluate, not proof that a blockchain is automatically better than a conventional database. A blockchain is most relevant when multiple parties need a shared, auditable history and have reasons not to rely on one ledger operator.

Descriptions of blockchains as completely immutable can be misleading. Cryptographic links can make alteration evident and, in some networks, difficult or costly, but competing histories, protocol changes, or decisions by authorized operators can affect how a ledger evolves. Corrections are often recorded as new entries rather than erasing the prior history, which can complicate privacy and data-retention requirements. Security also depends on the surrounding software, network governance, private-key handling, and the accuracy of data entered from outside the system; a ledger cannot by itself prove that an external report is true. Performance and resource costs vary: proof-of-work cryptocurrency networks require substantial computational work, while other consensus designs can have different costs and assumptions. Replicating and reconciling data among participants can also add complexity compared with a single database.