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What Is Blockchain?

Terminology Note: Distributed Ledger Technology (DLT) and Blockchain

In academic literature, regulatory documents, and industry practice, the terms distributed ledger technology (DLT) and blockchain are often used interchangeably. However, they are not strictly identical.

Distributed ledger technology (DLT) is a broader concept referring to systems that enable the distributed recording, synchronization, and validation of data across multiple participants without relying on a central authority.

Blockchain represents a specific implementation of DLT in which data are organized into sequentially linked blocks secured through cryptographic hashes. Not all distributed ledgers are blockchains, but all blockchains are a form of distributed ledger technology.

In this textbook, the term blockchain is used when referring to block-based distributed ledgers (such as Bitcoin or Ethereum), while DLT is employed when discussing the broader class of distributed systems, including non-block-based architectures.

Definition of Blockchain​

Blockchain is a type of distributed ledger in which data are stored in a sequence of interconnected blocks. Each new block contains a cryptographic reference (hash) to the previous block, forming a continuous chain that ensures the integrity of the entire system.

A defining feature of blockchain technology is that once data are recorded, they cannot be altered retroactively without modifying all subsequent blocks. This property makes blockchains resistant to tampering and unauthorized data manipulation.

At its core, blockchain is a data storage and verification technology. It can exist and function independently of crypto-assets, although it is most commonly associated with them in practice.

Origins of Blockchain Technology​

The earliest conceptual prototype of blockchain was described in 1991 by Stuart Haber and W. Scott Stornetta in their paper
How to Time-Stamp a Digital Document.
They proposed a cryptographically secured chain of blocks designed to protect digital documents from backdating and tampering.

Their work did not involve cryptocurrencies or decentralized networks in the modern sense, but it introduced the fundamental idea of linking records through cryptographic hashes. The Bitcoin whitepaper, published in 2008, explicitly references this research.

Blockchain became a practical and widely deployed technology with the launch of Bitcoin in 2009, following the publication of the Bitcoin whitepaper in 2008. The primary objective was to create a peer-to-peer payment system that could operate without reliance on centralized intermediaries such as banks or payment processors.

The concept of smart contracts predates blockchains. It was introduced in 1994 by Nick Szabo. In his article
Smart Contracts, he provided the following definition:

“A smart contract is a computerized transaction protocol that executes the terms of a contract. The general objectives of smart contract design are to satisfy common contractual conditions (such as payment terms, liens, confidentiality, and even enforcement), minimize exceptions both malicious and accidental, and minimize the need for trusted intermediaries. Related economic goals include lowering fraud loss, arbitration and enforcement costs, and other transaction costs.”

This definition remains fully consistent with the functioning of modern smart contracts, which became widely used in practice only after the introduction of the Ethereum blockchain in 2015. The Ethereum whitepaper was published earlier, in 2013.

Blockchain technology made it possible to address the problem of trust in distributed environments where network participants do not need to rely on mutual trust or centralized authorities.

How Blockchain Works at a Basic Level​

A blockchain consists of a sequence of blocks, each of which typically includes:

  • a set of transactions or data records,
  • a cryptographic hash of the previous block,
  • additional metadata required for validating the block.

Linking blocks through cryptographic hashes ensures that any modification to data in one block would invalidate all subsequent blocks. This mechanism underpins the immutability of blockchain records. It is important to note that data in a blockchain are not erased or overwritten; corrections are made by appending new information, while both the original and the updated records remain permanently stored.

Decentralization and Distribution​

Unlike traditional centralized databases, a blockchain is not stored in a single location. Copies of the ledger are maintained by multiple participants, known as nodes. Each node stores a full or partial copy of the blockchain and independently verifies the validity of newly added data.

As a result, blockchains have no single point of failure. In pursuit of enhanced resilience, experimental initiatives have even explored hosting blockchain nodes in outer space. For example, an Ethereum node was delivered to the International Space Station as part of a SpaceX mission
(source).

Data Immutability​

Once a block is added to the blockchain, its data are considered immutable, subject only to clarification through the addition of new records, as described above. While altering historical data is theoretically possible, in practice it would require control over a substantial share of the network’s computational resources, rendering such attacks economically impractical in most large-scale blockchains.

Data immutability is a cornerstone of trust in blockchain.

Key Takeaways​

Blockchain can be described as:

  • a distributed ledger technology,
  • a system without a central governing authority,
  • a mechanism that ensures transparency and long-term integrity of data.

Understanding the fundamental principles of blockchain technology is essential for the study of crypto-assets, smart contracts, and decentralized finance.