Before I explain what blockchain is really about, let me walk you through a real-world scenario. Let’s say you and some of your random friends are out for dinner.
Everyone’s having a good time, everybody’s eating up a hell lot of food. At last, the waiter comes with the bill and suddenly Jane doe from the group says she’ll pay the bill and split the amount to each of the gang afterwards according to the food they ate.
Everybody agrees, pretty usual scenario among friends. But here’s the catch you see, our Jane doe well, she’s a bit dishonest. She wants to cut down her split and also her boyfriend’s. So she pays the bill and kept the bill herself. She split the bill in such a way that the others pay her almost half more than they actually need to pay since it was from an expensive restaurant her split was convincing enough. She ended up saving a lot of bucks for herself and her boyfriend and cheated others. These kinds of situations happen right somehow or other in a different set of ways in our life. Now think of why Jane was able to pull off the cheat and lure money out. One simple reason, She only had the copy the bill you see. She was holding the only source of truth and the others could only comply with her splits as they don’t have any proof to back the claims and above all they trusted her. Now trust is something bad people always use to manipulate others.
Now let’s try the same scenario with some changes. The friends had a good dinner, had a great time, ate up a lot of expensive food but when the waiter came every one of the friends gets the exact copy of the bill. Jane Doe pays the bill but mischievous as always says the same split as last time saving a lot of money for her. But this time, everybody cross-checked Jane’s split with their own local copy of the bill to see if it’s checkout. It wasn’t looking good for Jane this time because the split she claimed wasn’t adding up in gangs local copy of the bill and they realized she was not telling the right split. They calculated the split themselves and shared their calculations with everybody and reached an agreement (consensus) and split the correct bill. This is how in short blockchain works. You see, instead of having one friend holding the single source of truth( the bill), everybody has a local copy of it with them, so when they feel doubtful, they could look upon the copy and make sure everything is right. What the world’s first bitcoin did was this, it showcased a new way in which a copy of all the history of transactions is reachable with everybody who is participating in the network so if anybody had doubt, they could verify independently. How everybody ultimately gets the same local copy is achieved making use of some consensus algorithms. This is the basic idea behind blockchain.
Thus with blockchain, the need for trusting a third party is eliminated because we can verify the result ourselves. This simple concept has disruptive use cases in the global banking sector, supply chain, Media copyrights, legal contracts etc.
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