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What Is Blockchain?

This 'Blockchain 101' article is designed to help the newcomer understand just what all the fuss is about.

By Judith Alison Lee  
on

“The Blockchain” has emerged as the hot new topic in the financial services sector and other industries, often described with bursts of exuberance. “Blockchain will change the world!” “The blockchain is the new internet!” “A game-changer!” Some of this exuberance may not be entirely irrational, and in any event, it is clear that blockchain technology is not going away anytime soon. But like many new technologies, few people seem to understand exactly what it is, how it works, and what it has the potential to do. This “Blockchain 101” article is designed to help the newcomer understand just what all the fuss is about.

Most people first hear of blockchain technology in connection with its use as the underlying technology for Bitcoin, a digital currency. Digital or virtual currencies, which have steadily become more widespread, are representations of value that can be transferred, stored, and traded electronically. Bitcoin is the most well-known of these currencies, and has increased to a market capitalization of over $15 billion since its creation in 2009. While much of the focus on Bitcoin and other digital currencies has been on the potential substitute for fiat currencies, there is a growing view that the true innovation is the infrastructure underlying virtual currencies — the decentralized ledger of transactions called the “blockchain.”

Proponents of blockchain technology believe that this underlying system could have far-reaching effects in a wide variety of industries and applications. In addition to virtual currencies, blockchain technology can have application in the field of funds payments and transfers (eliminating the need for intermediary financial institutions), the creation and transfer of digital assets (such as stocks, bonds, land titles), identity authentication and electronic signatures, immutable data verification, and “smart” contracts.

Continue reading to learn what a blockchain is and how it works.

Judith Alison Lee is Co-Chair of the International Trade Regulation and Compliance Practice Group and a partner in the Washington, DC office of Gibson, Dunn & Crutcher, LLP. Her areas of expertise include: USA Patriot Act, FCPA, economic sanctions and embargoes, export controls, and CFIUS. She also advises on virtual and digital currency issues. Ms. Lee was selected by Chambers Global as a leading lawyer for USA International Trade in Export Controls and Economic Sanctions in 2016 and 2017, and by Chambers and Partners as a leading International Trade Lawyer from 2007 through 2016 in its Chambers USA: America’s Leading Lawyers for Business Guide. She has been recognized by the Ethisphere Institute as one of the two 2013 “Attorneys Who Matter” in the field of Trade and Export Compliance. Ms. Lee is a former Co-Chair of the Export Controls, Sanctions and Anti-Corruption Subcommittee of the International Bar Association, and a former Co-Chair of the ABA’s Export Controls and Embargoes Committee.

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