What Is Blockchain Technology?

What Is Blockchain?

By Anders Bylund – Updated Jan 1, 2025 at 10:41 AM

Key Points

Blockchain technology is a secure ledger system powering financial and computing networks.
Its approval processes, like proof-of-work or proof-of-stake, enhance security and transaction efficiency.
Blockchain allows for rapid, secure data transactions influencing fintech and other industries.

On its most basic level, blockchain technology is a transaction ledger on a massive scale. Fortified by strong encryption and advanced security protocols, this ledger can serve as the basis for many different types of financial systems and cloud-computing networks. Blockchain is best known as the technology powering cryptocurrencies such as Bitcoin (BTC +1.83%) and Ethereum (ETH +3.37%), but that's just the tip of the iceberg.

The technology is more flexible than you might think. Here's what you need to know about blockchain networks.

Loading paragraph...

A diagram showing how blockchain technology works in five steps. — Image source: The Motley Fool

Loading paragraph...

What is blockchain used for?

The architecture has many different uses, and relatively simple cryptocurrencies in the Bitcoin mold only scratch the surface of what this technology can do.

The previously noted smart contracts are pieces of program code that can be executed by the Ethereum virtual machine when a predetermined set of conditions has been met. Let's say you want to sell an asset on the Ethereum network if a bidder offers a certain number of Ethereum tokens for it. You could set up a smart contract that checks the value of all incoming bids for your asset -- which could be a piece of real estate, a non-fungible token (NFT), or any other unique property -- and only accepts transactions above your minimum bid.

The virtual machine code is executed every time the preset conditions are met. This is the lifeblood of decentralized finance applications, including the aforementioned NFTs.

But that's just one small example in a vast ocean of possibilities. In practice, blockchains can manage any system that involves digital data points and/or transactions.

An infographic showing the various uses of blockchain technology. — Image source: The Motley Fool

Loading paragraph...

Investing in Fintech

Combine finance and technology and you get companies in this space.

Investing in Blockchain

This form of ledger technology is what's behind cryptocurrencies and other tech trends.

Investing in Technology

This vast sector is comprised of some of the most valuable companies in the world.

Investing in Cryptocurrency

These technologies serve as the gateway between the digital blockchain and human society.

How to invest in blockchain

Blockchain networks offer tons of promise for real-world implementation with game-changing implications for nearly every sector and industry. That being said, these are still the early days of cryptocurrency and blockchain technologies, and many loose ends are up in the air. The situation is arguably similar to the internet of the 1990s when many future business giants were created in garages and college campuses around the world -- but no one had quite figured out how to make money online yet.

Regulators around the world are still trying to figure out how legal and tax-related frameworks should look for the long term, especially on an international level. Also, both consumers and governments will probably need many years to build trust in these newfangled technologies.

Early investors can make a lot of money on blockchain networks and related stocks as the industry develops over the long haul, but every name won’t be a guaranteed winner. A sensible blockchain investor should approach this evolving sector with diversification and careful ticker-picking in mind.

About the Author

Anders Bylund is a contributing Motley Fool media and technology analyst covering semiconductors, cloud computing, internet infrastructure, quantum computing, and streaming media. Previously, Anders was a systems administrator for Nielsen Technology and CSX, gaining hands-on experience with enterprise-class systems. He was also a freelance writer for Ars Technica, TIME, USA Today, CNN, WIRED, and AOL's Daily Finance. He holds a bachelor’s degree in English and a master’s degree in library and information sciences from Florida State University. He believes in coyotes and time as an abstract.

TMFZahrim

@TMFZahrim

Anders Bylund has positions in Bitcoin, Cardano, Ethereum, and XRP. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, and XRP. The Motley Fool has a disclosure policy.