The real world example to describe how Blockchain works is Wikipedia. Wikipedia is a popular Internet encyclopedia with its articles being free-content. Almost every article is present on Wikipedia where you can read and gain the information.
Do you ever know who write those articles, can we trust them and who edit the information?
It is actually common people like us who write those articles. There are basically 4 people who are the part of this community.
1) Reader — whenever someone goes over Wikipedia and read articles; he becomes the community member of Wikipedia.
2) Writer — who creates new page and write/edit content
3) Editor — who edit the existing article or correct any type of spelling mistakes
4) Privileged Administrator — These people are generally those who have been volunteer Wikipedia contributors or senior content writers and have full authority to delete content or block IP address if they find anything disruptive or wrong.
Wikipedia is open source where anyone can come and contribute by creating page and writing articles. Since the system is open source, you might be thinking anyone can post wrong or malign information. Yes that’s correct!
Person can post the irrelevant topics but it won’t be published until the member of Wikipedia community authenticate and approve it. As soon as the article or post is published, ‘master copy’ is broadcast to each member whom they can review and approve and article is published.
However, the centralized nature of Wikipedia makes it prone to cyber-attack; since data is stored and secured on a single server.
In the case of a Blockchain, the data is distributed and decentralized; meaning all the nodes (participants) in networks work independently and since the storage of data or transaction is not stored on central server leading to no single point of failure.
Here is the real use case of how the Bitcoin blockchain works:
1) Initiation — A transactions is initiated where one person requests a transaction which triggers Bitcoin transaction
2) Broadcast — The requested transaction is broadcast to a P2P network as a “block” consisting of computers, known as nodes.
3) Validation — The network of nodes validates the transaction and the user’s status using known algorithm.
4) Consensus — Once the verified, the transaction is combined with other transactions to create a new block of data for the ledger.
5) New Block — The new block is then added to the existing blockchain, in a way that is permanent and unalterable.
6) Settlement — The transaction is complete and bitcoin change hand from Person A to B.
Source : https://medium.com/wharfstreetstrategies/how-does-blockchain-work-decoding-blockchain-technology-with-the-concept-of-wikipedia-7896839b9adf