Source: Quora, Jun 2018
The basic idea is that if you have multiple, decentralized writers to a database who do not trust one another, a blockchain could be a useful tool to maintain a trustworthy distributed database or ledger. However, it’s still not all that simple. To make a blockchain work, you need a perpetuating incentive system that drives all of the disparate, distrusting parties to certify one another’s work. Proof-of-work or proof-of-stake systems can work, but the system needs careful design to ensure that parties cannot collude to falsify information. It’s a hard problem.
Bitcoin brilliantly created a “mining” concept that “mints” currency based on “miners” doing work to certify blocks of transactions. The incentive system also had built in mathematical brakes and accelerators to prevent easy monopolization of mining. The system still runs the risk of more than 50% of mining resources falling under unified administrative control, in which case the majority can effectively lock out the minority, but that has yet to happen.