Daoist alchemy has a history of over 2,000 years. Its two main branches, known as Waidan (外丹 External Elixir Alchemy) and Neidan (内丹 Internal Elixir Alchemy) partly share their doctrinal foundations but differ in the respective practices.  

Waidan, which arose earlier, is based on the compounding of elixirs through the manipulation of natural substances and the heating of ingredients in a crucible. Its texts contain recipes, descriptions of ingredients, ritual rules, and passages concerned with the cosmological associations of minerals, metals, instruments, and operations.

Neidan developed, as far as we know, from the 8th century CE. It borrows a significant part of its vocabulary and imagery from Waidan, but it aims to produce the elixir within the alchemist's person, using the primary components of the cosmos and the human being as ingredients. Neidan practice cover a wider spectrum of material compared to Waidan; at its ends are, on the one hand, teachings on the Dao (the origin of the manifested world) and the actual practice methods. 

In both Waidan and Neidan, the practice is variously said to grant transcendence (a state described by such expressions as "joining with the Dao"), immortality (usually meant as a spiritual condition), longevity, healing (either in a broad sense or with regard to specific illnesses), and — especially in Waidan — communication with the gods of the celestial pantheon and protection from spirits, demons, and other malignant entities.

The main designations of the elixir are huandan (Reverted Elixir) and Jindan (Golden Elixir). Where Jin (Gold) represents the state of constancy and immutability beyond the change and transiency that characterize the cosmos. As for Dan ("elixir"), this word means "essence": in other words, the reality, principle, or true nature of an entity, or its most basic and significant element, quality, or property.  On the basis of this term, the tradition is often known as the "Way of the Golden Elixir" (金丹之道 jindan zhi dao).