It’s a little strange that the blockchain, and its tokens, aren’t actually that complex, and yet they can seem that way.
If you’re not careful you can veer off into an area like “mining” that leaves the person you’re talking to confused. It’s true blockchains have a lot of dimensions and depth.
But here’s why they’re simple: Think about the idea of a blockchain apart from any technology.
Imagine a big sheet of paper that magically records the details of two or more people exchanging money (e.g., Cameron sends Andre thirty cents).This magic paper knows the identity of each person.
This sheet of paper is also magically owned, and kept, by lots and lots of people and therefore no one can own it. And it allows anyone to see details about the money that’s been exchanged.
So this big piece of paper magically records the exchange of money between people it can identify, the full record is freely distributed to many, many people, and it’s transparent to all. And because the blockchain system is built this way, it’s highly secure.
A token (or cryptocurrency) is special money used for the blockchain, which is exchanged in this secure and open way. In fact, any type of asset, truly anything of value, can be exchanged on the blockchain using a token.
So in a sentence:
The blockchain is an ownerless, transparent, and highly secure way to exchange and record value.
Laura Shin’s recent podcast on “How To Explain Cryptocurrencies and Blockchains” with Jamie Smith and Amanda Gutterman is a great way to explore why blockchains and cryptocurrencies are inherently simple. Highly recommended.