Bitcoin, still a financial technology in terms of adoption, may seem mystical to some. Blockchain technology is different from any other system that is currently behind the coins, as a result it is not fully understood by people. For many, especially for older generations, cryptocurrency may seem magical, a digital witchcraft trick, and certainly not something to place your trust and life savings on.
To help understand cryptocurrency, I will try to explain bitcoin in an allegory with the village before electricity, without referring to modern technology.
Decentralized transaction logs.
Our hypothetical village does not have a centralized currency and is used instead of barter. The villagers, fed up with the inefficiency of barter but cautious when it comes to the central bank that issues money, adopt a decentralized accounting system, allowing the existence of units of measurement called VillageCoin and write all transactions in a public register.
Those who keep records
When a citizen wants to transfer an amount of VillageCoin to another person, they write the transaction on a piece of paper containing the container, issuer, amount and date, and send it to a large, secure box to be entered in the register. Those who keep these records are volunteers who process transactions. Several volunteers must sign up to sign a transaction before it can be included in the register, so that there are no frauds and mistakes. Transactions can also indicate a small amount of VillageCoin, set aside for volunteers, and higher commissions assure you that your transaction will be processed first.
Public registers
Once confirmed by volunteers, all transactions are written on paper which is then sealed in glass cases. These showcases are called blocks. Each block ends with a quick summary of the transaction contained inside. These blocks are chained and kept in the public archives of the village, so all transactions are permanently and publicly accessible.
Back to bitcoin
Bitcoin works in much the same way that the fictional accounting system of the village works. Transactions between addresses that contain an amount and a date are sent to the network. Instead of people keeping these records, there are computer systems called miners that process and confirm the transaction. They are paid in small transaction fees and slowly mine new coins over time, up to the limit of 21 million. All transactions end in data blocks, which are then chained to the blockchain as permanent and public reports.
The only key difference between bitcoin and the fictional VillageCoin is the use of digital registers instead of physical registers. Transaction addresses are not related to physical identity (no one needs to know who controls a particular address), transactions are instantaneous, unlike the global currency which needs physical materials, time and human effort.
Bitcoin is not that complicated after all
If we look at it through the lens of keeping physical records, bitcoin is starting to be more accessible to deranged people. The concept of blockchian, a decentralized public registry is a simple, natural conclusion, an expression of the fact that people no longer want to have a centralized governing body to govern their money. If more people understood the brilliant concept of bitcoin technology, the currencies controlled by central banks would have been abandoned a long time ago.
This is a really awesome explanation of how crypto works! A lot of explanations use terminology that is exclusive to the field, so even though I’ve been engaging in crypto sites such as Hive and Everipedia for months, I still have had trouble wrapping my head around it. Thank you! :D
Thanks #paigeautumneve for taking the time to read this article, I tried to be somewhat explicit for those who are just beginning to discover the blockchain or those who do not really understand how it works.You can re blog it maybe some new starters will benefit from it .