July 31, 2018
AI & Industry 4.0

Explaining Blockchain to your Grandma

Explaining Blockchain to your Grandma

Blockchain will change everything. It opens up a whole realm of possibilities, making it easier to conduct transactions, all while keeping our information safe.

Blockchain enables secure payments and transactions between peers – without intermediaries, and without their fees. It is the technology behind the more well-known Bitcoin and other digital currencies. But its potential goes far beyond digital currencies and money transfers.
We are used to relying on an intermediary, such as a bank or a government, to make monetary transactions. These third parties keep records and help build trust into the system. The rise of digital assets made it tricky to avoid double spending, so the middlemen remained relevant. Bitcoin entered the scene in 2008 as a way to directly transfer cash electronically. Bitcoin has since become the most well-known digital currency, with about 17 million Bitcoins out there right now. Bitcoin’s value has blown hot and cold so far: last Christmas the price skyrocketed to $19, 000 and today bitcoin is traded at $8, 100.

Blockchain expanded past the financial industry. Approximately 700 applications use the blockchain operating system, including the Ethereum public blockchain that provides a method for executing peer-to-peer contracts.

Get the Whitepaper: “How Blockchain Will Change Industries In The Future”

How it Works

While the traditional intermediary system essentially uses a central repository of information, blockchain is the opposite: it is a distributed, decentralized, public ledger of transactions. It establishes trust through consensus and computer code, and it has built-in security.

Using blockchain technologies, you can use software on your smartphone to pay another individual. It is basically like your virtual wallet.

  1. First, the software makes sure that you have enough to cover the amount that you entered. It then creates a payment order, also called a transaction, consisting of which “coins” to spend, the recipient and a digital signature.
  2. Your wallet is connected to others in the network. The network needs to be able to determine the order of transactions, so transactions are collected in groups called blocks. When you initiate a transaction, all other participants in the network are notified. They verify the existence of your coins and that they belong to you.
  3. Next, the transactions need to be confirmed. Network participants with the necessary computing power, called miners, shuffle sets of unconfirmed transactions until they find a set with the right properties. The participants send around this block until it is confirmed that it follows the rules (it answers a specific mathematical problem), at which point the transactions are entered in all ledgers. Basically, the transactions get executed, the coins you sent get invalidated for you, and they show up as new coins for the recipient.

A transaction can only spend coins that are already there. As such, every block has a fixed position and references the one right before it – hence the name blockchain. The chain of blocks shows every transaction made in that blockchain’s history, so you can track time and ownership.


Blockchain is an emerging technology that is expected to mature in coming years, with potential uses ranging from electronic voting to the management of health records.

Gartner predicts that by 2022, a business based on blockchain will be worth $10 billion, and that by 2020, new business models and companies will be created based on blockchain efficiencies. In fact, blockchain is expected to fundamentally alter entire industries and economies.

Watch how blockchain will affect industry verticals:


Interested in exploring learn blockchain and its possibilities? Feel free to learn how Ciklum experts will assist you with the Blockchain solutions development or simply contact us directly!

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Editor’s Note: This post was originally published in January 2017 and has been updated for accuracy and comprehensiveness