How would you explain blockchain technology to a layman? How is it decentralized?
While all of these answers are great-they don't exactly answer the first question.
How to explain Blockchain in layman terms.
I got this from John Hall:
https://medium.com/@coinagogo/explain-bitcoin-to-a-5-year-old-2091d003f5b3
He will talk about Bitcoin but Blockchain can be thought as the same thing.
However at the end I will explain why Blockchain does not equal Bitcoin. Not everything needs a blockchain.
Imagine a giant wall of letter boxes, each with a glass door. A crowd of people stand watching the letter boxes. Inside some of the boxes are coins. The crowd can see how many coins are in each box.
The crowd watches as a person steps forward with a key, opens a box, takes a coin, and deposits into the slot of another box. A clerk in the corner of the room writes this transaction into a ledger book. “Coin moved from box 4 to box 10.”
Time passes and more people step forward with keys, open individual boxes, and move coins to another. All the while the clerk in the corner is busy keeping track.
When approximately 10 minutes pass, the clerk closes his book and invites anyone in the room to solve a puzzle. A few people with huge calculators step forward. The first to solve the puzzle gets the honour to place the completed book on the shelf of official records. Good job buddy! The clerk rewards the winner with some newly minted coins.
This 10 minute cycle of record keeping continues so long as there are people in the room watching the boxes.
*The glass boxes are wallet addresses. Visible to all.
*The key is your wallet password. Keep it safe.
*The crowd is anyone running the bitcoin client software.
*The smart guys with big calculators are the miners.
*With a big enough calculator, anyone can try to mine.
*A book for every 10 minutes is a “block”.
*The shelf of books is the “blockchain”. All transactions ever, safely stored for anyone to read.
Why is a crowd of people watching a bunch of glass boxes important?
Before Bitcoin, a security guard would watch the boxes. Think of your bank, VISA or PayPal.
What if the guard caught a virus and got ill? What if the guard took a nap during some downtime? These mistakes happen when there is a single point of failure, like bank account details on a database.
Before Bitcoin, the keys were held on the guards belt. We trust the guard, of course, but must answer a number of personal security questions to gain access to our key.
Are we comfortable with the guard knowing so much? What if the guard lost the key? What if someone figured out the secret answer to our key? What if the guard sold our personal information? Not all guards are good.
With Bitcoin the whole world is watching the boxes all of the time. No one can lie, cheat or spend a coin in two recipient boxes at once. You hold the key to your box.
Remember always, with Bitcoin there’s no guard. If someone pickpockets your key, there is no one to turn to for help.
Bitcoin uses POW aka using a powerful computer to secure the network. POW is nothing new but Nakamoto using Adam Back Hashcash created an POW that can be used as a currency.
POW=Miners
Miners mine blocks.
Say there are 10 miner groups.
One miner group however has 51% of all the miners. With this huge number they overpower the chain. You might think-how does Bitcoin prevent this? By paying them. If miner does attack, Bitcoin will switch to a diff POW system.
There is POS an alt to POW where you replace miners with shareholders. The user/pool who has 51% of all coins securing the system control the blockchain. This is bad due to if you want to get rid of these bad actors you have to block their coins which ain't decentralized.... POS blocks this in theory bc you are risking your money aka "shares" and if 51% you lose the value...
Why Blockchain ain't useful for everything. You see in Bitcoin there is a 3-7tps limit. You could inc by inc the blocksize but that makes it harder for the recorder of the network aka nodes to store the info. Bitcoin Cash claims that only Miners full nodes matter.... but let me ask you this?
How is it decentralized if only like 10 people store information?
EOS and EOS scale by doing DPOS. Where people vote based on stake for Miners+Nodes which are called witnesses. They get paid to secure and if get bad in theory get kicked out.. A better system than Bitcoin cash but this still leaves the blockchain only stored in about 150 places. Steem is perfect with DPOS bc Social network needs to be free use and DPOS only provides safe zero fee txs.
Bitcoin is still the most decentralized coin in the world. With the most nodes(that 8500 number is only the public listing nodes, by default Bitcoin Core clients hide full nodes. The hiding nodes do the same thing as listening nodes except are private lol). So Bitcoin being true to it aspects of letting everyone store info plans on scaling by the LN.
This video will explain it to you:
As such Blockchain can be thought as decentralized secure but more expensive and slower form of databases.