In part 4 of the Bitcoin 101 series, we are going to dive into the Blockchain. We are going to answer all of the important questions you might have: What is it? How is it used? Why is it important?
Editor’s note: this may become too big to put all in one blog post so it may be spread out over a few different posts.
What is it?
The blockchain is a public ledger of transactions.
That is the simple answer. In truth is that the blockchain is a lot of things all combined into one giant moving system. In order to keep this simple, I will only include specific details to start and then grow on this topic until everything is covered.
When I talk about “the blockchain” I am referring only to the Bitcoin Blockchain. There are many other blockchains out there, but the bitcoin blockchain is the one that started the blockchain movement and it has been around the longest. For now I am going to stay away from talking about other blockchains out there and only focus on this one.
The blockchain is a series of blocks that are connected – one after another – starting from the genesis block all the way up until present day – which is the block that was just formed within the last ten minutes.
Taking a step backwards, you should by now know what a transaction is. (If not, see this previous posting about it.)
How does it work?
When a bitcoin user sends a transaction out to the bitcoin network to get confirmed, a miner takes it and puts it into a block – along with hundreds of other transactions. All the transactions that are in the “winning” block are confirmed – on the network by all the other miners – and that block is added to the blockchain. That is the newest block in the blockchain. The software that runs on the miner’s computers (called bitcoin core or bitcoind) can see that the next block is correct and automatically starts trying to confirm the next block in line. The software also knows that a new block needs to be confirmed every ten minutes. If it is taking the miners too long to solve the math equation, the difficulty is lowered. If the blocks are being confirmed too fast, the difficulty is increased.
I’m not going to get into mining or miners right now. That will be in a different Bitcoin 101 post.
Hope you are still with me. I want to tell you everything, but I am trying to pace myself so that I don’t lose you. If you are about to get lost, take a break and come back to where you are at. There is a lot to understand this and I will do my best to tell you everything you need to know without losing you along the way.
OK so where is this blockchain? Can I see it somewhere?
The blockchain exists all over the world. By now it is in almost every country. (They are also trying to put it in space.) This is what everyone means when they talk about how the bitcoin network is decentralized. It means that no one person has control over it. It is running independently on thousands of computers all over the world. It does still communicate to other miners and nodes through the internet. Inside of this software is a copy of the entire bitcoin blockchain. In fact when it first is turned on – before the software can do anything – it loads all current blocks/transactions from other nodes. Only when it is completely up to date is it able to move on to the next process that is coded to run.
You can see it out on the internet at various sites like blockchain.info or Block Explorer. Go take a look for yourself. Find the latest block number. See if you can look inside of a block and find some transactions that took place. It will help you to understand better.
When someone talks about Full Nodes they just mean the same software that the miners are using except it doesn’t confirm the blocks, it just relays the blockchain information. It is a smaller version of the same Bitcoin Core software.
That is a high level overview of some of the pieces to the blockchain. There will be more posts coming out in the Bitcoin 101 series that will go into more detail.
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