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NISTIR 8202 (DRAFT) BLOCKCHAIN TECHNOLOGY OVERVIEW
1 Introduction 264
Blockchains are immutable digital ledger systems implemented in a distributed fashion (i.e., 265
without a central repository) and usually without a central authority. At their most basic level, 266
they enable a community of users to record transactions in a ledger that is public to that 267
community, such that no transaction can be changed once published. This technology became 268
widely known starting in 2008 when it was applied to enable the emergence of electronic 269
currencies where digital transfers of money take place in distributed systems. It has enabled the 270
success of e-commerce systems such as Bitcoin, Ethereum, Ripple, and Litecoin. Because of this, 271
blockchains are often viewed as bound to Bitcoin or possibly e-currency solutions in general. 272
However, the technology is more broadly useful and is available for a variety of applications. 273
The numerous components of blockchain technology along with its reliance on cryptographic 274
primitives and distributed systems can make it challenging to understand. However, each 275
component can be described simply and used as a building block to understand the larger 276
complex system. We provide an informal concise description of blockchain technology: 277
Blockchains are distributed digital ledgers of cryptographically signed transactions that are 278
grouped into blocks. Each block is cryptographically linked to the previous one after 279
validation and undergoing a consensus decision. As new blocks are added, older blocks 280
become more difficult to modify. New blocks are replicated across all copies of the ledger 281
within the network, and any conflicts are resolved automatically using established rules. 282
1.1 Background and History 283
The core ideas behind blockchain technology emerged in 1991 when a signed chain of 284
information was used as an electronic ledger for digitally signing documents in a way that could 285
easily show none of the signed documents in the collection had been changed [2]. It was first 286
applied to digital cash in 2008 in the initial paper describing the Bitcoin electronic cash solution, 287
Bitcoin: A Peer to Peer Electronic Cash System [3], which was published pseudonymously by 288
Satoshi Nakamoto. The actual author(s) and owner of the first Bitcoins remain a mystery. Since 289
then, blockchain technology has become tightly linked to Bitcoin and is often assumed to be used 290
for monetary transactions (although it is not restricted to simple fund transfers). Nakamoto’s 291
paper contained the blueprint that most modern digital cash schemes follow, with many 292
variations. Bitcoin is in fact the first of many applications or use cases for a blockchain. 293
Many electronic cash schemes existed prior to Bitcoin, but none of them achieved widespread 294
use. By adopting blockchain technology, Bitcoin achieved compelling capabilities that promoted 295
its use. The use of a blockchain enabled Bitcoin to be implemented in a distributed fashion so 296
that no single user controlled the currency and no single point of failure existed. Its primary 297
benefit was to enable direct electronic financial transactions between users without the need for a 298
third party. It also enabled the issuance of new currency in a fair fashion to those users 299
(sometimes called miners or minters) maintaining the blockchain that, among other factors, 300
enabled lower transaction costs for using the system. The payment of the mining nodes enabled 301
distributed administration of the system without the need to organize those maintaining the 302
system. By using a distributed blockchain and consensus-based maintenance, a self-policing 303
mechanism was created that ensured that only valid transactions were added to the blockchain. 304