Blockchain was hailed as a technology that would transform everything from banking to supply chains. Here’s how it actually works, where it’s being used, and why some big projects failed.
A blockchain is a type of database, a digital ledger that records transactions. What makes it different is that it isn’t controlled by a single organisation, such as a bank. Instead, copies are kept by many computers around the world.
How it works
Transactions are grouped into blocks. Each block contains a unique digital fingerprint, called a hash, and the hash of the block before it. That links the blocks together in a chain.
If someone tried to change a past transaction, its hash would change, breaking the link with every block after it. The other computers on the network would reject the altered version.
To add new blocks, the network needs a way to agree on which transactions are valid, known as a consensus mechanism.
Bitcoin uses proof of work, where computers, known as miners, compete to solve complex puzzles. That uses large amounts of electricity.
Ethereum switched in 2022 to proof of stake, where participants lock up their own cryptocurrency as a guarantee they’ll act honestly. That cut its energy use by more than 99%.
Where it came from
Blockchain was introduced in 2008 in a paper by Satoshi Nakamoto, the pseudonymous creator of Bitcoin, which launched in 2009. It solved the problem of how to transfer digital money between people without a trusted intermediary.
Smart contracts
Ethereum, launched in 2015, introduced smart contracts, programs stored on a blockchain that run automatically when certain conditions are met. They underpin decentralised finance, or DeFi, which offers lending, borrowing and trading without traditional banks.
Stablecoins and tokenisation
Stablecoins are cryptocurrencies designed to hold a steady value, usually tied to the U.S. dollar. They’re widely used to move money in and out of crypto, and the U.S. passed a law to regulate them in 2025.
Banks and fund managers are also testing tokenisation, recording ownership of assets such as bonds, funds or property on a blockchain, which supporters say could make trading faster and cheaper. The Reserve Bank of Australia has run projects exploring how tokenised assets and digital money could work.
The ASX’s failed project
In 2017, the ASX announced it would replace CHESS, its system for settling share trades, with a blockchain-based system. In 2022, it abandoned the project after years of delays, writing off around $250 million. Regulators later criticised the ASX’s handling of the project.
The debate
Supporters say blockchain can make transactions more transparent, secure and efficient, and reduce reliance on middlemen.
Sceptics argue many uses can be done just as well with a normal database, that blockchains can be slow and expensive, and that the technology has been associated with scams, hacks and speculation.
Most experts agree blockchain’s biggest real-world use so far is in cryptocurrency and stablecoins, while many other promised uses are still being tested.
