Blockchain — A guide in laymans terms

If you’ve recently begun reading about blockchain technology it can be confusing and feel quite overwhelming. If you aren’t familiar with computers in terms of hardware, software, as well as data networks. Then it’s quite understandable why this concept is so confusing to many. I myself have read many articles that try to explain blockchain technology, what it does, etc. After reading this article you should have an abstract understanding of what blockchain is, and how it works.

(10/04/2018) Update: We have begun the process to legally define blockchain further.

What is Blockchain?

Blockchain in a very simple sense is software. It is a different way to program networks for data integrity. This is where the buzzwords of decentralization, trustless, peer-to-peer, governance protocols and all of the other confusing nomenclature begins coming into play. So for the sake of simplicity keep in mind that blockchain is software like the internet and the way it is programmed allows for many beneficial transformations to take place.

Because it is all software and how it’s programmed, I believe this is where the huge disconnect of understanding comes from. Society see the same problems faced today as when we produced personal computers, the internet itself, cell phones, etc. It’s hard to understand things you cannot see and it can be very difficult explaining those things to people who do not understand programming, networks, and other technical concepts that have high-entry barriers.

“Why can’t we just program the internet to work the way blockchain does?”

Now to someone who understands programming, this may seem like a silly question. But to most people, it is actually a very valid one. The reasoning for that is thinking of the internet and blockchain as two different things on a fundamental level.

They are not.

When it comes down to the base level blockchain is a form of coding. However, the underlying difference is how the code is written, as well as how data flows through networks. Blockchain allows us to add important concepts and mechanisms to software through coding structures known as Smart Contracts which can vary in function and utility.

How does blockchain work?

This is a very tough question to answer because the ideas are still so new. Yes even though Bitcoin has been around for the time it has been. Think about computers in the year 2000. They had been around for over 20 years and we still had dial-up internet for the most part. There are people who have said blockchain technology doesn’t work today and they aren’t wrong, but what they really mean to say is that blockchain is currently lacking network interoperability, scaling solutions, user-friendly interface, well-defined universal protocols. All of which can be implemented and improved in time, and many companies are currently working to tackle these problems today. 

“ The biggest change that 1980s home computing brought about was probably in how people thought about computers. Historically, they were data processing machinery for scientists and big organisations; full of expensive electronics. They were rare — most people would never even have seen a computer in real life, and even a large organisation might only have a single computer.”

Not just a value transfer

Another large misconception that still largely permeates the cryptocurrency space today is the idea that cryptocurrency only fulfills the need of storing and transferring value. Again in an oversimplified context that is somewhat true. However, I would like to point out that how we choose to store and transfer value already has many different forms today except that blockchain technology has the ability to tie ownership to even digital value.

A few examples of that would be:

Represents the value of user attention. (Watch an advertisement. Get paid for your attention)

Adds value to gamified micro tasks. (Get paid for completing small tasks)

This token represents the value of electricity that can be traded between users. (Generate extra electricity and sell it to another person)

Ties ownership and value to in-game consumables. Buy that fancy new sword in a video game for $10. When you’re done using it you can sell it back and retrieve your value. Or even add value to the item and make money after selling it.

All of these feats can be accomplished thanks to the immutable record created by a decentralized ledger. Meaning the record can’t be changed, ownership can be tracked, and verified. Most of these functions are accomplished through smart contracts which came along with the creation of Ethereum.

What is a smart contract?

In the traditional sense a contract is defined as:

“A promise or set of promises that are legally enforceable and, if violated, allow the injured party access to legal remedies”

There are many problems with this model already and in it’s most simple form it could be said a contract is a piece of paper with promises written on it between two parties wherein both agree that if either party doesn’t do what they promise they can legally come after each other. Any human knows that trust is a fickle system which is why we have contracts because they provide an incentive for both parties part to follow through on what was agreed on.

A smart contract is a set of programming functions

“A smart contract is a set of programming functions that can be automated to trigger when specific conditional settings are either met or not met.”

With smart contracts, we are able to digitize agreements and allow for pre-conditioned triggers to automate the rest of the process for us. Furthermore, smart contracts can be legally backed agreements in the same way a paper contract can be. They may even soon be legally recognized in California under Assembly Bill 2658.

One large difference is that because blockchain has an immutable record you can also tie contractual reputation to an individual. Meaning an individuals identity will have a history you can check on to see if they have followed through on past contracts. Additionally, smart contracts can be programmed to fulfill more complex tasks that can provide more overall utility.


It can be hard to understand blockchain and cryptocurrency being that it really is still very new. Although, we see that there is much-needed work in terms of network communication, scalability, security, and adoption. Time is relative and a year can feel like a very long time. However, if you rewind back to the “cutting-edge” age of dial-up internet technologies you would find many people asking what the point of having internet was. Networks were easily congested, websites were mostly lackluster random addresses with little to no information. You even had to make a choice between using your internet and using the phone plugged into your wall! Moving forward things seem to happen slowly but hindsight is always 20/20! 

If your chair isn’t also your briefcase then you haven’t experienced the thrill of life. Yet.

Verified on

November 6th 2018, 14:33