What's the first thing that pops up in your mind after you see the term Blockchain?

A chain of connected blocks? Yes! You're absolutely right!

Basically, blockchain is a technology which allows us to trade(or transfer money/asset) in a much more efficient manner than any other technology we use today.

Now, what is this chain and what are these blocks? Let's get to know the basics and create a basic definition of blockchain.

Let's first understand why do we need a technology like Blockchain?

Why Blockchain?

Taking a real-world example, when we interact with each other there are various ways we transfer value(money or information). For this trade we require middlemen.

For example:

• If you want to take a cab, you need companies like Uber, Ola etc.

• If you want to buy a product online, you need Amazon, Ebay etc.

• If you want to transfer money to another individual you need banks.

These companies build a level of trust between two individuals directly transacting with one another. Primarily because if two people want to communicate they need a central party(which could be corrupted or malfunctioned).

Now imagine a world where you don't need these middlemen! Two individuals can directly exchange information or any other asset directly with each other.

Blockchain primarily revolves around making transactions in form of some valuable asset (money or cryptocurrencies).

This is what Blockchain provides - A decentralized system to trade assets.

Pros of Blockchain

Now, that we have a very basic understanding of what Blockchain is, let's understand what is it that Blockchain can offer to this world that these middlemen cannot.

Let's understand this by taking an example of three friends - Ana, Carlos and Jay.

• Ana has $100, Carlos has $60 and Jay has $40.
• Let say, Ana and Carlos are already in Blockchain. What that means is Ana and Carlos are connected in the Blockchain and both of them have information about how much money does the other one have and they make direct transactions to each other. Blockchain provides peer-to-peer connection.
• Now, if Jay wants to join this blockchain, he has to provide a proof that he owns $40. Based on that proof Ana and Carlos can accept/reject him to the blockchain.
• If Jay joins the blockchain he will get a copy of information about Ana and Carlos as well! In this way all three of them know about how much other people own.
• Now, let say somebody wants to cheat the system. If Ana tries to send $200 to Carlos or Jay, this transaction cannot happen as Carlos and Jay already know that Ana owns only $100! Blockchain ensures transparency!
• Corresponding to every single transaction made by Ana, Carlos or Jay a new block in created in the blockchain which represents all the information about to transaction and every individual in the blockchain receives a copy of the new chain (known as ledger). This can be used to track data across the blockchain. Blockchain ensures traceability of data.

To summarize, the pros of blockchain are:

• Transparency
• Decentralized (no central authority)
• Peer-to-peer connection
• Security
• Traceability of data shared or stored
• Increases trust

Now that we know what Blockchain actually is, putting it into simplest words -

"Blockchain is an online distributed system which can store information efficiently."

Stay tuned for Part 2!