How does Bitcoin work?
Bitcoin works thanks to miners securing the network and processing transactions on the blockchain.
Satoshi’s whitepaper was revolutionary, making the Bitcoin network the first blockchain of its kind.
While most cryptocurrencies today are backed by a blockchain of some sort, this Bitcoin guide will focus on the technology behind Bitcoin’s specific blockchain.
The Bitcoin blockchain
The Bitcoin blockchain is exactly as it sounds - A series of blocks, connected together by chains.
Each block contains a Bitcoin transaction, and since the blocks are chained together, each block can easily be processed within an organised manner.
The blockchain is the manner that Bitcoin keeps a total, immutable record of all transactions that have been performed on the network.
On the Bitcoin network, a new block is created about once every 10 minutes.
Each new block is then confirmed by the distributed network of computers known as miners, ensures all transactions are processed and finally recorded forever more on the Bitcoin blockchain itself.
Whenever new blocks are added to the blockchain, the newest version of Bitcoin’s ledger is also transmitted, ensuring the security of the network.
As the blockchain is run by a decentralised network of miners competing to keep it secure, there is nothing or nobody you need to trust other than the code itself.
Right there for everyone to see from the start.
It’s this trustless nature of the blockchain that gives Bitcoin value, with every transaction always publicly detailed right there on the blockchain.
By simply Googling ‘Bitcoin block explorer’ you are able to view every piece of data on the blockchain, presented in a myriad of ways.
Bitcoin miners
As we mentioned above, the Bitcoin network is made up of connected computers running the Bitcoin software.
These are what are called Bitcoin miners.
Miners process transactions by adding to the blockchain and secure the network.
As a result, miners are rewarded for their work by being paid in newly minted Bitcoin.
The process of mining bitcoin involves finding new blocks on the blockchain.
While the word miner conjures imagery of men down a coal shaft, it’s actually just computers solving complex math problems.
You see whichever miner solves the problem first, they are the one that gets to add the next block to the blockchain.
Other miners on the network verify the block, the miner is awarded a mining reward as payment and the blockchain continues.
The importance of the Bitcoin blockchain
It can’t be understated how important the blockchain is to the Bitcoin network and as a result, money’s freedom of movement.
The mainstream media likes to run negative stories about how much energy the Bitcoin network uses.
While there’s no denying the fact that Bitcoin’s proof of work mechanism is highly power intensive, it is extremely important for the freedom of money.
The majority of this energy is being used by miners to solve the math problems required to add a new block to the blockchain.
But it’s imperative for the security of the network that these math problems are extremely difficult and require huge amounts of processing power to solve.
This is because the more difficult these problems are to solve, the harder it becomes for the network to be interfered with.
Best of probabilities to you.
Direct from the desk of Dane Williams.
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