Matthew Decker of McBreen & Kopko

With a price that skyrocketed more than 1,600 percent in 2017 alone, it's no wonder that the now infamous cryptocurrency Bitcoin has become something of a cultural phenomenon. In narrowly focusing on Bitcoin's price, and its volatile fluctuations, however, many have overlooked the very thing that sets Bitcoin apart from traditional financial instruments and fiat currencies: its revolutionary blockchain technology.

Reduced to its simplest form, the blockchain is a ledger of all transactions that have occurred across a given network; that network can be highly restricted, or, in the case of Bitcoin, open to the entire universe. What makes Bitcoin's blockchain unique, however, is that it is not only universally accessible, but also decentralized and fully distributed—meaning that its data is not stored or managed by any central authority or machine. Instead, the data that makes up the blockchain is distributed and, theoretically, held and maintained independently by each member, or node, of the network. In other words, each member of the network holds its own “copy” of the ledger.

The other important component of the blockchain, aside from its structure, is its verification process. New transactions are publicly broadcast across the network; from there, various independent network members will examine the transaction data to determine if it is consistent with the ledger. This process is known as mining. For example, Party A may wish to send to Party B one Bitcoin. In order for that transaction to be verified, three independent members of the Bitcoin network must agree that the ledger properly indicates that Party A is the owner of the particular Bitcoin being sent. If the independent members reach a consensus that the transaction is consistent with prior ledger data, the transaction is verified, and a new block is printed onto the chain. When the network is synced or refreshed, which occurs every few minutes, the new block will appear on each independent members' “copy” of the ledger, thus creating a record of the transaction. Therefore, in order to counterfeit or cheat the blockchain, a bad actor would potentially have to alter each separate ledger across the entire network—a task which is nearly impossible by modern computing standards.