Blockchain technology offers a new way to establish trust in a digital world that’s both increasingly interconnected and increasingly vulnerable. As more of our financial, commercial, and social activity moves online, blockchain provides a secure, transparent, and tamper-resistant foundation for recording information and transferring value without relying on centralized intermediaries. This shift has the potential to reshape industries, empower individuals, and unlock innovations that weren’t previously possible. Understanding blockchain is the first step to understanding why cryptocurrencies exist and how they’re transforming the modern digital economy.
Recent developments make now a particularly compelling time to learn about blockchain — especially the growing trend of tokenization. For example, BlackRock — one of the world’s largest asset managers — recently said tokenization could trigger the biggest overhaul of global financial markets since the 1970s. Meanwhile, long-time financial institutions like Goldman Sachs and BNY Mellon are already rolling out blockchain-based versions of traditional investments such as money-market funds, marking what many see as the beginning of mainstream adoption.
On a broader scale, tokenizing real-world assets — from treasuries and bonds to real estate, art, and even private equity — is transforming how ownership and trading can work, making previously illiquid or hard-to-access investments more liquid, divisible, and globally tradable. That shift could redefine who gets to invest, how markets operate, and how quickly value can move across borders.
Given this momentum, understanding blockchain technology and tokenization may help you anticipate the next evolution of finance and why cryptocurrencies and related technologies are rapidly moving from fringe to fundamental.
Blockchains are hosted on many servers around the world. This means many people can participate in running the network. This process is called Distributed Computing and it ensures that every “network node” has a copy of the “blockchain.” This information is updated in real time when for example, a transaction takes place.
The benefit to this information-intensive redundancy is removing potential points of failure for the system. A website can be taken down by its web host, for any reason or no reason at all. The host is a “trusted third party” that can serve as a censor or gatekeeper. Decentralization strives to remove those chokepoints to achieve independence and censorship resistance.
If you’re involved in cryptocurrency investing (e.g., buying and holding crypto tokens like ETH or BTC), you’re a participant in the blockchain but are likely not running a network node. Coinbase (COIN), the most popular cryptocurrency trading platform, does allow you to contribute to their validator nodes by “staking” your ETH, for instance, and earning a yield on the staked ETH in the form of transaction fees.
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Blockchain is particularly interesting as a societal development because of something called Brewer’s theorem. Brewer’s theorem states that any distributed system cannot have consistency, availability, and partition tolerance simultaneously.
High-quality blockchains like Ethereum overcome these problems largely through data replication.
Byzantine Generals
In 1982, Leslie Lamport proposed a thought experiment called the Byzantine Generals problem. In this scenario, the generals must communicate using messengers to agree to attack simultaneously. Therefore, they require a mechanism that allows for agreement on simultaneous attack even if traitors have infiltrated their ranks.
Here’s how it was summarized in the original Microsoft Research paper:
Imagine that several divisions of the Byzantine army are camped outside an enemy city, each division commanded by its own general. The generals can communicate with one another only by messenger. After observing the enemy, they must decide upon a common plan of action. However, some of the generals may be traitors, trying to prevent the loyal generals from reaching an agreement. The generals must decide on when to attack the city, but they need a strong majority of their army to attack at the same time. The generals must have an algorithm to guarantee that (a) all loyal generals decide upon the same plan of action, and (b) a small number of traitors cannot cause the loyal generals to adopt a bad plan. The loyal generals will all do what the algorithm says they should, but the traitors may do anything they wish. The algorithm must guarantee condition (a) regardless of what the traitors do. The loyal generals should not only reach agreement, but should agree upon a reasonable plan.
This problem was solved in 1999 by Castro and Liskov, who presented the Practical Byzantine Fault Tolerance (PBFT) algorithm. Then in 2009, the first large-scale application for a distributed monetary system was created with the advent of Bitcoin.
Bitcoin introduced blockchain to the world with its first real practical application.
Consensus Mechanisms
The validity of cryptocurrency as a medium of exchange hinges on the fact that blockchain exists as a technology and means of social agreement. These cryptocurrencies use blockchain-based digital ledgers made up of transaction blocks. These blockchains utilize different types of consensus mechanism algorithms. These algorithms determine the process for interacting with data “on chain.” Participants must agree on the state of all information stored on the blockchain. That data must be reconciled in real time to ensure accuracy.
This data, once reconciled, is publicly visible and immutable.
The goal of this blockchain technology is to render it sufficiently decentralized to make it very difficult or impossible to hack due to the resources needed to do so. In essence, the blockchain becomes a source of historical record that validates all holdings of market participants while removing the risk of a single point of failure or censorship.
In the end, the blockchain is more than just technical jargon. It represents a shift in how we create, share, and preserve trust in the digital age. From decentralized networks that eliminate single points of failure, to consensus mechanisms that allow global participants to agree on a shared record of truth, blockchain introduces a new architecture for coordination and value exchange.
As tokenization accelerates and real-world assets begin to move on-chain, understanding these principles is no longer optional for investors, builders, or everyday users. It is the key to navigating a future where transparency, security, and decentralization play a central role in how we interact with money, markets, and one another.
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*This post has been updated from a previously published version.