To explain how blockchain works, let's look at what steps are involved with the existing business model for completing a simple payment transaction.
A customer, Alice, needs to pay $10 to Bob, who happens to have an account in the same bank as Alice. She can make the payment either by visiting a bank branch or using the web. Let's say she tries to do that online through the bank's web portal. She will need to authenticate herself using her username and password and then put the transfer order in and wait for the bank system to confirm whether the transaction is completed.
As shown in the following diagram, in order to support such online banking activities in the traditional world, the bank has to establish an identity ...
