Blockchain
A blockchain is a shared ledger maintained by many participants rather than one operator, in which transactions are grouped into blocks, each cryptographically linked to the last, so that the record cannot be altered without the alteration being evident, and agreed by a consensus mechanism rather than a central authority. Public blockchains are open to anyone; permissioned ledgers are run by known participants. In finance it underlies crypto-assets, stablecoins and tokenised securities.
- Also known as
- Blockchain-based ledger, Shared ledger, Distributed ledger, DLT, Public blockchain, Permissioned ledger, Distributed ledger technology
- Used at
- crypto-asset trading and custody, stablecoin issuance and settlement, decentralised finance, tokenised securities and funds (the 2024–2025 wave of tokenised money-market funds and bonds), cross-border settlement pilots, and, on permissioned ledgers, trade finance, syndicated loans and post-trade experiments of uneven success
- Binding
- the ledger itself is not regulated; the activities on it are — the EU's MiCA (crypto-asset service providers and stablecoin issuers, fully applicable from 2024–2025), the UK's regime for crypto-assets and stablecoins, US federal and state rules and the 2025 GENIUS Act for payment stablecoins, securities law for tokenised securities, and AML rules including the travel rule for transfers
- Typical mechanics
- transactions signed with private keys; validators (miners under proof of work, stakers under proof of stake) order them into blocks; consensus rules decide which chain is valid; finality ranges from seconds to an hour; throughput from a few to thousands of transactions a second depending on the chain; fees vary with congestion; smart contracts on programmable chains execute logic on-chain
- Typical trade-offs
- removing the trusted operator costs throughput, latency, privacy (public ledgers are public) and reversibility (there is no one to reverse a mistaken or fraudulent transfer); the benefit is a ledger nobody controls and anyone can verify, which matters where the parties do not trust an operator or none exists
- Parties
- the protocol developers, validators, exchanges and custodians, issuers of tokens and stablecoins, the regulators, the institutions running tokenisation programmes, and the enterprise-blockchain vendors whose 2016–2020 consortium projects mostly closed
How a blockchain works in practice
A stablecoin issuer mints a million tokens on a public chain by calling its smart contract; the transaction is signed with the issuer's key, broadcast, included in a block by a validator, and confirmed by the network. A holder transfers 50,000 tokens to an exchange: signed, broadcast, confirmed in seconds, visible to anyone with the address, final without any intermediary's approval — and irreversible if the address was wrong or the key was stolen. The exchange's compliance team screens the sending address against sanctions lists and analytics that trace the tokens' history across the public ledger, because the transparency that makes the chain auditable also makes every transfer traceable. Settlement between two institutions in a tokenised bond runs the same way, on a permissioned chain where the participants are known and the validators are the banks themselves — which is a shared database with extra steps, and its value is in the shared record and the programmable settlement, not the decentralisation.
Where blockchain earned a place in finance is narrower than the 2017 claims and wider than the 2018 dismissals. Stablecoins move dollars across borders in minutes at low cost and settled trillions a year by 2025; tokenised money-market funds give institutions on-chain cash; crypto exchanges and custodians are a regulated industry; and the programmable settlement of tokenised assets is being built by the largest asset managers and banks. Where it did not: domestic payments (instant-payment systems do the job without it), most enterprise consortium projects (the trusted operator was fine), and the applications where privacy and reversibility were requirements. For a fintech, the questions are whether the parties lack a trusted operator, whether the asset benefits from being programmable and transferable without one, and whether the regulatory perimeter is clear; for a buyer, a blockchain-based target is priced on its licences, its custody controls and its regulatory exposure before its technology.
For a founder, blockchain is a tool with specific advantages and known costs, and the products that survived used it where the advantages held; for a buyer, the ledger is rarely the asset — the licences, the customers and the reserves are.
Example
A cross-border payments fintech serving importers in emerging markets moves its settlement layer from correspondent banking to a stablecoin: customer funds are converted to a dollar stablecoin on a public chain, transferred to the fintech's partner in the destination country in minutes, and converted to local currency and paid out. Settlement time falls from two days to twenty minutes; cost from 1.8% to 0.6%; the fintech's need for pre-funded balances in twelve countries falls by 80%. The compliance build is the larger project: MiCA authorisation as a crypto-asset service provider, wallet screening and travel-rule compliance on every transfer, custody arrangements with a regulated custodian, and a reserve-quality review of the stablecoin issuer. A buyer in 2025 prices the fintech at a premium for its unit economics and spends its diligence on the crypto-asset licence and the custodian's controls.
Common mistakes
- Using a blockchain where a trusted operator's database would be cheaper and faster. - Treating on-chain transparency as privacy; every transfer is public. - Forgetting irreversibility; a mistaken transfer has no one to reverse it. - Building a product before the regulatory perimeter — securities, e-money, crypto-asset — is clear. - Valuing a crypto-asset business on its technology rather than its licences and custody.