Intro : Blockchain
Let’s try to understand in a simple way,
Think blockchain as an account book in sky, people all over the world can see and write in it with ink and when once it gets dry no one can change the entries (transactions) or delete them. It's not just 1 book, multiple identical copies can be made by any person. When someone tries to add new entries, everyone who holds the copy verifies it first and decides if new entry is right or wrong. If the entry is correct, it is allowed to be added and the person who wrote gets rewards.
This process leads to decentralization, meaning:-
Everyone can participate
Data is distributed to many individuals (no single person holds all information)
No middleman or central authority.
If everything is available in public domain then how it gives privacy?
This is where crypto (encryption) comes in play. Every piece of information is heavily encrypted by network before putting it in public domain so identity of person is not revealed.
Fiat currencies issued by the government and regulated by a central bank eg RBI. They are based on a centralized system which means they are controlled by 1 entity. This 1 entity holds and stores all the information about you and decides the value of your currency or can completely make it worthless (Demonetization).
Cryptocurrencies are different from Fiat currencies as it is available only in digital format and not controlled by any central authority, everyone has a copy. This is called decentralization.
BUT decentralization is not cheap, it comes with a big cost that includes nodes (hardware that keeps copy of book), energy
(electricity) to run hardware, money (for making infrastructure, server, internet, technical skills etc).