The problem a shared ledger solves
A digital file can be copied. Money needs an additional rule: the same spendable balance cannot be paid to two different recipients. A blockchain lets participants check a shared transaction history under a common set of rules.
Transactions are collected into blocks. Cryptographic hashes connect those blocks, while a consensus mechanism determines which valid history participants accept. This does not make every application honest; it makes particular records verifiable under the network’s assumptions.
Coins, tokens and applications
A coin is usually the native asset of a network, such as bitcoin on Bitcoin or ether on Ethereum. A token is typically issued through an application on an existing network. Two tokens can share a ticker while representing completely different assets.
An exchange, a wallet and a blockchain are different things. An exchange matches buyers and sellers. A wallet helps authorize transactions. A blockchain processes and records them. A problem at one service does not automatically mean the underlying network stopped.
Try explaining it
Imagine a class maintaining a shared register of points. The difficult questions are who can add entries, how conflicting entries are resolved and what stops someone inventing points. Those questions also help you evaluate a crypto network.
Before moving on, explain why a token’s name is insufficient identification. Identify its network and contract address, and distinguish a verifiable transaction from a claim that a project will succeed.
An example: a token transfer is a change in a ledger
Imagine an account with 100 fictional tokens sends 15 to another account. The network checks the authorization and applicable rules, then records the resulting state. The receiving wallet reads that state; it does not receive a physical object. Network fees and the rules for the particular token are separate parts of this example.
A block explorer can help you inspect an address, transaction identifier, block and contract. A successful transaction proves that the network accepted an operation. It does not prove that the recipient is trustworthy, that a token has economic value, or that an off-chain promise was fulfilled. A convincing interface can display a real transaction while making an unrelated false claim.
Coins, tokens and the questions to ask first
A native coin is part of a network’s own accounting and fee system. A token can be implemented by a contract on that network. Different networks can have tokens with identical names or symbols. Record the network and, where applicable, the contract address before comparing supply, balances or prices.
Check your understanding: if a company says a purchase is “on blockchain,” what exactly is recorded? Is it a payment, a receipt, a claim on an asset or the asset’s ownership register? Identify who can change the record and who is responsible for delivering anything outside the network.
Sources & further reading
Educational content. Examples are illustrative. Protocols, products and rules can change; consult the linked documentation for current details.