Blockchain explained like you are five years old

Blockchain explained like you are five years old

If you have followed the news or other media in the past year, then you have undoubtedly heard about blockchain. With this technique we can once and for all answer the question: how can we trust each other without a third party, such as a bank? Let me start with explaining blockchain like you are five years old.

To explain blockchain to you, let me introduce you to a student house. There are four students living in this student house who share everything with each other, the costs for groceries, internet, water, gas and light. They write everything down in a notebook. They also write when someone advances something for another.

A roommate seems to have a lot of money left. The others do not trust it. They can ask the landlord if he wants to keep the notebook up-to-date, but they do not trust the landlord. There is another solution. All roommates receive an identical copy of the notebook, and everyone keeps track of everything. Nobody can secretly add, remove or forget something, because then the notebooks are no longer the same. The students regularly check whether everything is the same in all the notebooks.

This is how blockchain works, only not in a notebook but digitally. It works in such a way that all roommates can trust it, without a bank or another third party. All transactions are kept in the blockchain and must be approved by other users in the blockchain network. In the blockchain you send nothing more than digital information. With digital coins, such as Bitcoin and Ethereum, you send digital money with some extra information about the sender and the destination.

With blockchain, you can do a lot more than only send and receive money. There are several other use cases:

  • Maersk is using blockchain to build a marine insurance platform.
  • MIT is building an ecosystem for creating, sharing, and verifying blockchain-based educational certificates.
  • Dubai will put entire land registry on a blockchain.