Explain Blockchains, Cryptocurrencies Like I'm Five

#explainlikeimfive

Cryptocurrencies and Blockchain are getting huge spotlight from last few years.

I googled, read some articles but couldn't understand how these things actually work.

I want to understand how Cryptocurrencies and Blockchains actually work!

Thank You 😀

Top comments (9)

tux0r • Aug 19 '18 • Edited

Those are different things.

A "blockchain" is a decentralized way to store data. Basically, all participants keep a copy or, at least, a hashsum of the "database" on their computers. Every time a new dataset ("transaction") is added, it will be based on each previous transaction. (This is why Bitcoin transactions are taking so long to complete.) If any inconsistency is detected between the various participants (usually, many of them will have to "confirm" a transaction before it is considered valid), it will be dropped. (This is the ELI5 explanation. Technically, more things happen.)
Cryptocurrencies are Ponzi schemes, using blockchains to achieve their "goals".

Palash Bauri 👻 • Aug 19 '18

So we can create as many Bitcoins as we want?

tux0r • Aug 19 '18

Yes, you can. If you have enough computing power, that is.

Palash Bauri 👻 • Aug 19 '18

Thank You for Explanation! 😁

bkmalan • Nov 23 '21

The total amount of bitcoins that can ever exist is 21 million, Of which ~18M is mined.

Anthony Dreessen • Aug 20 '18

Tux0r gave a good explanation on blockchains and summed up my own feelings on cryptoCOMMODITIES pretty well, but a little bit more info about what makes a crypto commodity different than a regular one.

First, a quick term: a "Ledger" is the term for a copy of the database/hashsum of the database of the transactions

Each member of the blockchain has a "wallet" this is the ledger that says how many coins belong to each wallet (including itself)
solving a complex computational problem allows you to add coin to the wallet (this is generally done automatically using bitcoin mining software)
any transaction between wallets is done by confirming that the transaction is possible by asking the number of ledgers. Different coins are set up differently, but I believe that Bitcoin uses a simple majority of ledgers.
The transactions are "anonymous" because the wallets are not personalized

tux0r • Aug 21 '18

Someone else did.

tsmoffat • Aug 20 '18

The best way I've seen cryptocurrencies described are "Imagine if you left your car idling overnight so it could produce fully solved sudoku that you can use to buy heroin"