I assume that someone who is a novice, not an engineer, not a finance whiz, maybe he/she is not even very computer savvy can get the point of what “Blockchain” literally is.
What is it?
Before we start, we should clarify the point -“Blockchain” is not synonymous with “Cryptocurrency ”, which is statistically the majority of misconception.
Blockchain is a sort of technology. Basically, it is a database, a new type of way to keep accounting. You can consider it as a ledger without any geographic barriers. On top of that, it can be simply accessed and shared by many quickly. (e.g. searching records on Etherscan. https://etherscan.io)
What problems does it solve?
Before the advent of blockchain, all transactions must have an intermediary to be arbiter or to do the matchmaking. However, with the blockchain, each transaction can be sealed as a block, and then uploaded to blockchain which is the worldwide ledger without any third parties interfering.
What are some of the advantages and limitations of using it?
There are several advantages from its intrinsic attributes. For one, it is decentralized or distributed. It means that data in blockchain is typically stored in the thousands of internet-enabled devices such as computers. Therefore, it is safe to say that systems and data are hardly compromised by malicious attack or have highly resistant to technical failures. For another, it is immutable and transparent, for transactions which have already been uploaded to a blockchain is unable to tamper and easily to track. As a result of that, we can simply distinct whether the record is legit or rip-off.
Still, there should be some limitations that people are still struggling. I would say the significant one is the computed power for mining block is literally electrically consuming. It almost takes same as the amount of electricity of the combination of three countries to remain the operation. Therefore, people come up with several solutions such as switching to proof-of-stake which is unnecessary to use hardware to validate the data.
How does it work?
To embark on, we should go over the original mechanism which is proof-of-work proposed by Satoshi Nakamoto. First and foremost, a new transaction is entered the system. Then, this new transaction(or block) is sent to P2P(Peer-to-Pear) network which is numerous of computers, making up the blockchain then. Eventually, after processing and confirming by the computers, the transactions will be added to the blockchain where all previous records are kept.
