Blockchain Technology

What is Blockchain Technology?

Blockchain networks are used to maintain growing lists of records. This is performed through a network of computers connected to the main blockchain network. Each computer stores a copy of the list of records. Any new entries are recorded in all copies of the record. In essence, the blockchain is a peer-to-peer network used to store and verify records.

What are the Uses of Blockchain?

Blockchain is currently predominantly used in cryptocurrency networks. This technology was popularised with the advent of Bitcoin.

Blocks are the backbone of Bitcoin that enable the cryptocurrency to remain secure and, therefore, in demand as a store of value. Other alternative coins, or altcoins, have followed Bitcoin in using the technology to power their cryptocurrency networks. Some, like Ethereum, have made changes to their network by adding features.

Blockchain, however, also has other uses. Because of the built-in authentication feature, it is also being used to verify logins or website certificates.

How Does Blockchain Work?

Computers are voluntarily added to the network for the typical Blockchain network and given a copy of the existing list of records. These records are known as blocks. New records or blocks are added to the chain – hence the name. When new blocks are added, the computers follow a specified protocol to verify and record the new block into the chain.

New blocks are added on top of old blocks. This structure makes it very difficult to alter old blocks. In fact, old blocks cannot be modified without changing the data in subsequent blocks that follow it in the chain.

Furthermore, all computers in the network must agree to change this old block. This is what prevents fraudulent data.

If a counterfeiter attempts to create a fake record of cryptocurrency, the computers in the network will disagree with the change in an old block. The fake record will be invalid and not recorded in the network.

Blockchain in Cryptocurrency

In cryptocurrency, computer users part of the blockchain network are known as miners. Because they take part in verifying and recording cryptocurrency transactions, they are compensated with a small amount of the cryptocurrency in question. The act of mining, thus, involves offering your computing power to the network in exchange for some cryptocurrency.

Different cryptocurrencies have different verification and recording protocols. Because of this, the computing power and hardware required for each block network can differ. Additionally, the confirmation speeds for transactions under different cryptocurrencies can also vary.

Bitcoin confirmations may take between 10 minutes to an hour or more per confirmation. In contrast, Ethereum confirmations are generally much quicker. Usually, there is a tradeoff between security and speed and mining fees and speed.

Check out this course on Application of Blockchain for Accountants

How blockchain technology works

At its core, blockchain is a distributed digital ledger — a shared record of transactions maintained across many computers rather than held by a single central authority. Transactions are grouped into "blocks", each cryptographically linked to the one before it, forming a chain that is extremely difficult to alter retrospectively. New entries are validated by the network through a consensus mechanism, so no single participant can unilaterally change the record. This combination of distribution, cryptography and consensus is what gives blockchain its defining qualities: transparency, tamper-resistance and the ability to operate without a trusted intermediary.

Why it matters for finance and accounting

For finance professionals, blockchain is relevant well beyond cryptocurrencies. Its potential applications include faster and cheaper cross-border payments, "smart contracts" that execute automatically when conditions are met, tokenisation of assets, and tamper-resistant audit trails that could change how transactions are recorded and verified. For accountants and auditors specifically, a shared, immutable ledger raises possibilities for real-time assurance and reconciliation — though in practice adoption is still developing and varies widely by sector. Understanding the technology helps finance teams judge where it adds genuine value versus where it is hype. For the profession-specific angle, see our guide to blockchain for finance professionals.

Limitations and risks

Blockchain is not a universal solution. Public blockchains can be slow and energy-intensive, governance and standards are still maturing, and the regulatory treatment of blockchain-based assets continues to evolve. There are also real risks around security, scalability and the irreversibility of transactions. As with any emerging technology, the sensible approach is to understand the fundamentals, watch how standards and regulation develop, and evaluate specific use cases on their merits. You can build relevant skills through our CPD courses hub.

Common questions about blockchain

Is blockchain the same as cryptocurrency?

No. Cryptocurrency is one application of blockchain, but the underlying technology has many other uses — from supply-chain tracking to record-keeping and smart contracts. Blockchain is the infrastructure; cryptocurrencies are just one thing built on top of it.

Will blockchain replace accountants?

It is far more likely to change parts of the role than replace it. Even if a shared ledger automates some reconciliation and record-keeping, professional judgement, interpretation, advisory work and assurance over how systems are designed and controlled still require skilled accountants.