The block chain is an on line decentralised public ledger of most digital transactions that have taken place. It is digital currency's exact carbon copy of a higher street bank's ledger that records transactions between two parties.
Just like our modern banking system couldn't function with no means to record the exchanges of fiat currency between individuals, so too could an electronic digital network not function with no trust that comes from the ability to accurately record the exchange of digital currency between parties block chain software.
It is decentralised in the sense that, unlike a conventional bank that will be the only holder of a digital master ledger of its account holder's savings the block chain ledger is shared among all members of the network and is not subject to the terms and conditions of any particular financial institution or country.
A decentralised monetary network ensures that, by sitting outside of the evermore connected current financial infrastructure you can mitigate the risks of being section of it when things go wrong. The 3 main risks of a centralised monetary system which were highlighted consequently of the 2008 financial crisis are credit, liquidity and operational failure. In the US alone since 2008 there have been 504 bank failures as a result of insolvency, there being 157 in 2010 alone. Typically this kind of collapse does not jeopardize account holder's savings as a result of federal/national backing and insurance for the very first few hundred thousand dollars/pounds, the banks assets usually being absorbed by another financial institution nevertheless the impact of the collapse could cause uncertainty and short-term problems with blockchain technology accessing funds. Since a decentralised system like the Bitcoin network is not dependent on a bank to facilitate the transfer of funds between 2 parties but alternatively relies on its countless amounts of users to authorise transactions it's more resilient to such failures, it having as numerous backups as there are members of the network to ensure transactions remain authorised in case of 1 person in the network'collapsing'(see below).
A bank will not need to fail however to effect on savers, operational I.T. failures such as those who recently stopped RBS and Lloyds'customers accessing their accounts for weeks can effect on one's power to withdraw savings, these being a result of a 30-40 year old legacy I.T. infrastructure that is groaning under any risk of strain of keeping up with the growth of customer spending and a lack of investment in general. A decentralised system is not reliant on this sort of infrastructure, it instead being on the basis of the combined processing power of its countless amounts of users which ensures the ability to scale up as necessary, a problem in virtually any area of the system not evoking the network to grind to a halt.
Liquidity is one last real danger of centralised systems, in 2001 Argentine banks froze accounts and introduced capital controls consequently of the debt crisis, Spanish banks in 2012 changed their small print to allow them to block withdrawals over a quantity and Cypriot banks briefly froze customer accounts and used around 10% of individual's savings to help pay off the National Debt blockchain database.
As Jacob Kirkegaard, an economist at the Peterson Institute for International Economics told the New York Times on the Cyrpiot example, "What the deal reflects is that becoming an unsecured or even secured depositor in euro area banks is much less safe since it used to be." In a decentralised system payment takes place with out a bank facilitating and authorising the transaction, payments only being validated by the network where there are sufficient funds, there being no third party to avoid a transaction, misappropriate it or devalue the amount one holds.