How blockchain works(...)The problem with financially focused systems, which blockchain solves, is that it’s hard to set up a wholly trusted intermediary between two parties who want to do business electronically. Most likely, that trusted third party is a bank or other financial institution. However, while most transactions are trouble free, acceptance of a certain amount of fraud is built into current processes, and disagreements occur that require mediation. That raises both risk and cost.
Blockchain changes the equation by transferring risk from a human-based process to one where cryptographic proof of contracts, agreements, prices, etc., takes the place of that variable trust. Each step, or block, in the process is locked in place, the details of each block are carried forward to the next, with each subsequent block containing a hash of the previous one.(...)
https://gcn.com/articles/2016/03/25/how-blockchain-works.aspx
