Functionality of blockchain simply explained with Bob and Alice

A simple example of a transaction between Bob and Alice is used to explain the blockchain. This is intended to give an initial overview of the topic, as well as the functionality of the Bockchain technology.

Alice tells Bob that there's a new way to transfer money remotely. So without the need for a (central) institution in the background of the transaction. She further explains that the money transfer takes place immediately and that within a very short period of time the money is available and that this takes place completely anonymously. Bob is excited about this new opportunity to transfer money.

Alice explains to Bob that all he has to do is download a so-called wallet and generate a keypair so that he can access the network to carry out transactions.

Alice would like to give Bob a coin. To execute a new transaction, Alice needs Bob's address (which is the public key from the keypair). In addition, Alice must use its private key to encrypt the transaction, which also confirms that she is the one who owns the coin to be transferred. The transaction is digitally signed using asymmetric encryption. Alice must keep the private key secret to prevent manipulation of the transaction.

Once Alice has completed the transaction, it will be sent to all participants on the network so that they can verify the transaction. To do this, the network uses the public key of Alice to check, if it fits with Alice private key she used to sign the transaction. If that is a fit, the transaction is mined with many other transactions and eternalized into an block. Now Bob can check with his public key address and sees that his ledger got updated with the transaction Alice has sent.

THE END

The original contribution is in German found on www.blockchainbasics.ch which was a school project for the MSc Business Information Systems at ZHAW School of Management and Law Program.