Blockchain simplified for a 5 year old
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There are a lot of big terms and buzzwords we could bury ourselves with and we can easily get carried away… let’s not.
[Crypto lingo] ELI5 = explain like I’m 5
Technical jargon aside, think of blockchain as a public record keeping book or a giant digital Lego wall. It keeps records of every important transaction in ‘blocks’ of Lego.
Transactions are just what they sound like, the transfer of value (and information) between two parties. The transfer of value can involve almost anything, from bitcoins, to car registrations, to legal contracts.
Every time a new transaction is made it is recorded on a ‘block’. Each block contains a collection of transactions, as well as all of the additional information needed to verify the integrity of the block itself.
The block is distributed to a bunch of people in the network (who are really computers, called ‘miners’) who validate the set of transactions. Imagine the Lego on a conveyor belt waiting to be checked & stamped. Validation involves an ecosystem of miners solving special algorithmic problems.
Side/foot note: You can join this network of miners if you have super computer & a mining rig which you can buy off the internet.
The transaction is not approved until the special problem is solved. Once approved, the block (containing all the transactional data) is added to the existing chain and shared with everyone in the block ecosystem. Continuing with the analogy, the Lego gets the stamp of approval and is super glued to the giant Lego wall (what we call the ‘blockchain’).
The ‘blockchain’ contains the complete list of transactions that exist in the history of that cryptocurrency world.
Once published, it cannot be altered; it cannot be deleted. It is open to the public to view and make a copy of. No tampering can be done to it.
It is forever out there for the universe to see.
A bit on protocol
For bitcoin, miners are rewarded bitcoin in exchange for solving the complicated problems and this is actually the only way more bitcoins can be made. This system is based on a protocol called proof of work.
This is not the case for all other cryptocurrencies.
This space is rapidly evolving, and smart people (problem solvers & developers) have worked out other validation processes to serve as the basis of other cryptocurrencies. Other founding protocols you might have heard of include proof of stake, proof of authority etc. This evolution expands the possibilities for application away from justcurrency itself.
Let’s talk about why it is appealing
Blockchain: It’s about integrity.
Since all the activity is completed via a decentralised network it does not have one central point for failure which also means it is more capable of withstanding malicious attacks. This makes it secure, democratic, and transparent.
Cost effective, efficient and auditable.
The protocols in place keep users in control of their information (and activities) making the need for a trusted third party redundant. As a result, less clutter, lower fees, faster transactions.
The ‘transactions’ could be taken out of the financial context and be made applicable to other areas. This variety is part of what gives blockchain technology its appeal, as it allows for a verifiable way to record transfers of any and all types of value over the Internet.
Think; online voting (registration & records), government records, identification registrations (birth/death/marriage certificates, passports), land titles, car registrations, court records, criminal records, business records, permits and inspections etc (this sky is really the limit here).
Of course, this revolutionary technology is ‘new’ and there are plenty of challenges to tackle, but you can see how it has the potential to disrupt multiple industries.
Nonetheless, there is no better time to join the movement — the future is exciting.
NB: I am clearly not an expert in this field and have plenty to learn. These are snippets from my journal. I try and keep it objective so you can make your own call. Will leave it in your capable hands to use information at your own discretion :)
For a more detailed (and articulate) explanation of how blockchain can radically transform our economy, watch Bettina Warburg’s ted talk below:
p.s. This article was published several months earlier and I have cheekily copied this article from my Linkedin.
p.s.s. I have recently joined the Wirex team (blockchain fintech) to bring more educational content around this space. Follow my journey and send me your thoughts/ideas on what you’d like to learn more about.
