Blockchain technology presents a transparent, decentralized way to conduct electronic transactions. Its fundamental innovation is an immutable digital ledger of transactions that is openly writable by anyone, yet remains censorship-resistant and has contents can be widely agreed upon in most cases. Combining these elements is designed to give greater visibility into the way transactions work by offering a record that is, by design, auditable and authenticated by many people instead of just a single entity.

In the original whitepaper describing how a blockchain works, Satoshi Nakamoto—the pseudonymous creator of Bitcoin—defined an electronic coin as a “chain of digital signatures,” which are added in chronological order. This chain allows everyone with access to the blockchain records to see the entire history of a transaction, and each link in the chain reinforces the one that comes before it. This design, known as distributed ledger technology, can safeguard against fraudulent transactions given a sufficient diversity of verifiers—as it would be difficult if not impossible to change every record in every place it is kept.

Cryptocurrencies, one of the most common applications of blockchain, offer an alternative to the existing financial firms that control, and sometimes censor, online transactions today. Blockchain-based currencies allow transactions to be verified by a number of people, rather than relying on the trust or judgment of a single payment processor. This provides those engaged in legal-but-controversial speech a way to receive funds when existing financial institutions refuse to serve them.

As with many developing technologies, blockchain has drawn sharp scrutiny from policymakers, including regulators who claim that they can impose liability merely for the act of writing or distributing code. EFF is pushing back against such policies and has asserted since 2014 that publishing code for cryptocurrency or other blockchain-based projects is a form of protected speech, just like other kinds of software development.

While EFF supports regulators stepping in to hold accountable those engaging in fraud, theft, and other misleading business practices, we have been skeptical of many regulatory proposals that are vague; designed for only one type of technology; could dissuade future privacy-enhancing innovation; or that might entrench existing players to the detriment of upstart innovators. Outside of regulation, we’ve also urged custodial services to adopt best practices around defending user rights, including issuing regular transparency reports.

There are promising new approaches to developing blockchain technology to address financial and decentralization issues in a digital world, including research into more privacy-protective cryptocurrencies. As these and other developments evolve, EFF is working to ensure that regulators keep the concerns of users front and center.