Blockchain cipher suitable for preschoolers
I'd suggest you don't try to create or use a cipher.  Rather, I think maybe a more interesting way to view blockchain systems is as a log that is created through a distributed lottery.

So, in lesson one, you could describe how to keep track of something (account balances?  something more relevant?) via a sequence of log entries written on the board.  This would be a centralized scheme.

In lesson two, you can make it distributed.  In each stage, have a lottery where you randomly pick one of the students to win the lottery.  The winner of the lottery gets to write down the next log entry on the board.  Everyone else watching can see whether that student did it correctly and fairly.  If not, the next winner ignores the bogus stuff written on the board.

No cryptography is needed.  You just need a way to randomly pick one student in the room, in a fair way.  This could be done with numbered balls in a box, or any number of other ways.