You and I are residents of a village, in this village, we run everything based on trust.
Say I am a sheepherder and you are a farmer. I have agreed to trade my 1 sheep for 10kg of your wheat.
I told you to come to my farm to collect 1 sheep and to leave 10kg of wheat in return, at your own timing.
When I check on my sheep the next morning, I found that 5 of them has disappeared and you have only left me 8kg of wheat. Without a system to verify this process, there might be a dispute after the trade has happened.
I proceed to blame you in front of the whole village by saying you’re a cheat and liar. No one should do trading with you ever again! But no one can verify who’s right or wrong objectively based on this transaction.
Now, the process of the blockchain is simply this; to create a system that will allow you and I to trust each other without the need for us to even know each other. The blockchain is a way to validate and keep track of records.
So here’s how it goes; upon you taking one sheep and giving me 10KG of wheat; the whole village gathers at my farm to verify this process. They are incentivized to do so as the winner who becomes the first to authenticate this transaction will get a small incentive upon the transaction going through — a piece of the lamb in this case🐑
This process is also known as “proof of work”. As long as 51% of the villagers acknowledge that you have indeed traded 10kg of wheat for 1 sheep, they would have achieved “consensus” and the trade would take place. Once consensus has been established, there will be no way to dispute against or alter the records. Every villager right now will store this record known as a “block” in their books, known as a ledger.
Why is it called the blockchain? Every time a transaction is added on to this “book”, it forms a block and it is stored in a chronological chain. Hence Blockchain😁
If I wanted to blame you for taking more sheep that you did, I will not be able to do so as no one will believe in me. Everyone agreed the transaction took place and kept a record in their books. As long as 51% voted yes, 49% will still have to agree with the vote.
If I wanted to change this transaction — “to alter an event that happened in history”, I would have to go through every villager’s book to physically change that transaction. That would be physically strenuous and the work that I put up for it might cost me more than my losses; the “sheep that I’ve lost ”. So no one will really do that.
So here’s the key points of the blockchain:
3) Non-disputable aka Immutable
4) Creating a system for everyone to trust each other even if we do not know each other
More things to find out about
2. Proof of work/ proof of stake/ various types of algorithms
3. How to hack or change a record on the blockchain
4. What is mining and miners — and how do they maintain the whole blockchain network
7. So so much more…