At its nuts and bolts, a blockchain is a chain of data blocks that are maintained by a network of nodes. A node is a computer running the blockchains consensus algorithm to validate transactions within blocks added to the chain.
What is the function of a blockchain? A blockchain is used to record transactions across a network of computers. Each block in the chain contains a record of one or more transactions.
How is it different from a cloud data service? Two key points here, firstly once data has been added to a block, it cannot be altered or removed. Secondly, each transaction is verified by multiple nodes, using complex (cryptographic) algorithms, assigning each transaction a unique identifying code referred to as a 'hash', as well as the hash of the previous block to ensure it links to the rest of the chain. These two points make the blockchain a significantly secure and transparent way to store and transfer data.
How is this related to Cryptocurrency and Bitcoin? Fundamentally, Bitcoin and other cryptocurrencies are blockchains. They have a finite (albeit vast) number of tokens/coins that are used to transact on their respective chains. Indeed blockchain technology was first developed as a way to facilitate the use of the digital currency, bitcoin, but it has since been applied to a wide range of applications.
How are you able to transact on the blockchain? Transactions are carried out between wallets. You store cryptocurrency and other assets held on the blockchain in a compatible wallet. To transact on a specific blockchain, like Bitcoin, you will need to have the native blockchain coin/token (BTC) in your wallet.
Has blockchain technology advanced? Bitcoin is now referred to as a layer one blockchain built using a proof-of-work consensus algorithm. Newer blockchains such as Cardano are referred to as layer two blockchains and use a proof-of-stake consensus algorithm. These layer two blockchains were developed to address proof-of-work blockchains limitations in transactions per block and demand for scalability.
The technology was first developed as a way to facilitate the use of the digital currency, bitcoin, but it has since been applied to a wide range of applications.
Whilst this video may seem a little long it's well worth watching once or twice. It really does cover blockchain basics in a friendly way.
You could say that the blockchain is like a big digital puzzle, where each piece of the puzzle represents a transaction. When someone wants to add a new transaction to the puzzle, it has to be checked and approved by lots of different people, or 'nodes', before it can be added. Once a piece has been added to the puzzle, it can never be taken out or changed, which makes it a secure and transparent way of storing information.