Explaining blockchain technology in simpler terms that a high school student would understand

Overview

Imagine a notebook that records everything that has ever happened to it, from the moment it was created until now. This notebook is not owned by any one person, but by a whole bunch of people all around the world. And to make sure that no one can change what’s written in the notebook, everyone who adds something to it has to agree on what they’re writing and verify that it’s accurate. This is kind of like how blockchain technology works.

Let’s understand one at a time:

What is Blockchain?

Simply putting, blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat the system.

Blockchain can be broken down into these different elements: –

What is Block?

Block contains data, Hash of the block and hash of the previous block.

Data:- The data that is stored inside the block depends on the type of blockchain. For e.g. Bitcoin blockchain stores the detail of the transaction because Bitcoin’s blockchain was created as a way for people to send money over the internet. Here, bitcoin stores data like sender (who sent the Bitcoin), receiver (Receiver of Bitcoin) and the amount of coin.

Hash:- A block also has hash. In simple language it’s like a fingerprint of person. Each block has unique hash. Its something like this fc2d1df43bap444kskk2kh4ikwbq9. Hash identifies the block and all of its content and is always unique. Once a block is created hash is being calculated. So if anything is changed inside the block, it causes hash to change.

Hash of previous block creates a chain of blocks and this way blockchains makes the transaction more secure.

What is mining in blockchain?

It is a peer-to-peer computer process. Blockchain mining is used to secure and verify transaction for example in a bitcoin blockchain(also known as ledger).

For example: –

In normal economy if A was to send $2 to B, then bank acts as an intermediary who stands between two parties. Banks validate the transaction between A and B and record it for future reference. Everyone trusts bank, bank takes its commission/charge for validating those transaction. But what if someone changes those records from the bank (specifically central bank). Government has the power to change it. “Power tends to corrupt and absolute power corrupts absolutely”

This is where concept of bitcoin emerges. People who came with the idea of Bitcoin came with the idea that there should not be a centralized power. It should be decentralized, and bitcoin is the first real life implementation of blockchain technology where records are not kept by the single authority.

Blockchain use peer-to-peer network, where everyone on earth is allowed to join provided, they have special blockchain mining software and hardware required to process the transaction. Blockchain mining is the process of adding transaction records to the bitcoin blockchain. This process of adding blocks to the blockchain is how transactions are processed and how money moves around securely in the form of Bitcoins. This process of Blockchain mining is performed by a community of people around the world called ‘Blockchain miners.’

In the above example, when A send 2 bitcoins to B, someone (miner) in the network creates a block (containing data, hash and the hash of the previous block) and copy of that block is sent to everyone on the network. However, this block is not written in plain English language, we can visualize this as a complex mathematical problem. This process of solving complex mathematical problem is called as proof-of-work in blockchain. Each miner then verifies the block to make sure that it hasn’t been tampered with. In other words, these miners start solving those complex mathematical problems (perform proof-of-work) through software and hardware that is installed. Now, when majority of the miners validate, confirm and secure the bitcoin network, all the miners in the network create consensus. Finally, the process of sending Bitcoin by A to B becomes successful. These miners get some amount of reward for performing proof-of-work in the form Bitcoin. In this way, miners mine the Bitcoin.

Let me continue the above example and make you clear about the concept of Public Distributed Ledger (DLT). In the above example, after consensus (approved transaction) gets updated in a block which is updated in every miner’s record. In real life, there will be many transactions in one block. Everyone keep on adding the block in the entire blockchain which is also known as ledger), are linked to each other. Now, this ledger will be maintained by all the miners, and this will be called as Public Distributed Ledger.

The decentralized database managed by multiple participants is known as Distributed Ledger Technology (DLT).

Properties of Distributed Ledger Technology (DLT)

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