The Bitcoin Blockchain is a single digital file that contains a list of all transactions that have occurred using bitcoins. This would include any transfer of bitcoins as well as the addition of newly minted bitcoins.
The purpose of the blockchain is to keep an accurate record of all the bitcoins in use, and the amount of bitcoins connected with every address (account) on the bitcoin network. This allows the bitcoin network, and all bitcoin users to follow the transaction history of all bitcoins. You can see this by looking at the bitcoin blockchain explorer. More importantly, by keeping such a record, it is possible to make sure that no one can spend the same coins twice. This is known as double spending. Preventing it is critical to the stability of any currency, digital or not.
Double spending is much like writing two cheques for $100 when your bank account only has $100 in it. When someone does this, eventually the bank notices and one cheque bounces and someone doesn’t get paid. Since bitcoin doesn’t have a central controlling authority, some way is required to prevent the chance of double spending. The blockchain does this.
The instant a transaction is made, it is added to the blockchain, and distributed to all users of bitcoin. This means that everyone knows that the sending account now has fewer bitcoins in it (and its current total), and that the receiving address now has more coins in it (and its current total). If the sender attempts to send more than they have, the entire network will know and the transaction will be rejected.
Bitcoin Blockchain Security
Being the smart person you are, you are probably wondering why some nasty person doesn’t just hack the blockchain and re-write transactions so they can keep spending their bitcoins over and over. While this is technically possible (it is called a 51% attack), in real life, it is impossible.
Every transaction, and all data in the blockchain is encrypted using an algorithm called SHA-256. This is a very complex way of encrypting data. It has two parts: the encrypted data, and a key to unlock it. With SHA-256, any change to the data (even just adding a zero, or a period), will create a completely different encryption, requiring a completely different key to unlock it. If you know the key, it is very easy to unlock, without it, it is a pure guessing game. The bitcoin network uses very large keys that need hundreds of billions (trillions) of guesses in order to find the key. To crack the key would require millions of dollars worth of computer equipment working around the clock. And, the crack would have to happen before any new data was added to the blockchain. This is because once new data is added to the chain, any previous data is considered accepted by the entire network and is locked in place permanently.