What's a blockchain?


It's a virtual ledger that keeps track of cryptocurrency transactions.

During the great cryptocurrency gold rush, “blockchain” emerged as of of the the most uttered and least understood words in the English language — and no, it is not the preferred chunky gold jewelry of Bitcoin’s most ostentatious nouveau billionaires.

Blockchain technology is the technical bedrock of this new economy, and the reason that cryptocurrencies like Bitcoin, Ether and Litecoin have any value at all. Cryptocurrencies differ in many significant ways, but they all have a couple things in common: they have no intrinsic value (like a warming fur pelt or a yummy pork belly) or physical form (like a quarter). And they are considered “decentralized” — meaning that there’s no single authority like the Federal Reserve regulating them and no banks counting and holding them. They move solely through direct transactions between individuals. So how the heck can you keep track of those buggers, even know how many exist, and who owns them? Through blockchains, which are virtual ledgers that record every cryptocurrency transaction in a permanent, immutable record, called a “block.” Bitcoin’s core innovation was the blockchain - which is what made it so disruptive as the first digital currency of its kind. Though Bitcoin was the first to successfully use blockchain technology as a digital cash system, the other cryptocurrencies that have followed it have emerged with their own blockchains — though some, like Bitcoin Gold and EtherZero, have “hard forked” from their parent blockchains to form blockchains of their own.

Congrats! You now have an excellent excuse to employ the profane-sounding phrase “hard fork” in polite conversation.

Wealthsimple is investing on autopilot

In just 5 minutes we'll build a low-cost portfolio that's optimized for your financial goals.

Learn more