Bitcoin 101: The Protocol – Part 9

For part 9 in the Bitcoin 101 series, I want to take a dive into the bitcoin protocol.  It is quite a large topic so I probably will not talk about the entire thing, but it is important to step into what the protocol is and what the purpose of it is.

In all phases of life, there are rules.  When you drive your car, you have to obey the speed limit.  However, you are able to go over the speed limit, but if you get caught, there is a consequence. So it seems there is some cushion there so that sometimes you can break the rules. You are OK as long as you don’t get caught. But what about if you tried to go over the speed limit, your car would stop accelerating once you were driving at 55 MPH. Would that be weird?   Yeah maybe a little. But you would also never get speeding tickets.

I see the bitcoin protocol as a collection of rules.  These rules are very well thought out and then written into the source code. The bitcoin software that runs on Nodes and Miner’s computers is called “bitcoind.”  Inside of that software, there are rules that are programmed in so that they are followed all the time by everyone. This keeps things fair for every user of bitcoin.

Shown in the following list are some of the rules that I have learned are part of bitcoin:

  1. A reward will be given every 10 minutes to one of the miners that are solving the math equation and confirming Blocks.
  2. The reward will start as 50 BTC in 2009.  Then it will “halve” approximately every 4 years.
  3. In order for a transaction to be confirmed, it must exist in a block. The blocks must be confirmed by the entire Bitcoin Network. (Or at least a large majority of it.) The blocks are the most secure and fully confirmed when the block your transaction is in is at least 6 layers deep.
  4. When broadcasting a transaction there must be a sender’s and receiver’s public address attached to the transaction so that the software knows where the transaction is going and where it came from.

The rules go on and on.

You could actually categorize the rules even further. For example, there are rules that apply to transactions. There are also rules that apply to sending transactions to the network and how the network propagates the transaction. There are even more rules around how the blockchain exists and what rules have to be followed in order for it to work.

When the planning began for bitcoin, the early developers probably had some very interesting conversations around these rules and what they would be. They had to somehow foresee what kinds of issues there would be and how the rules would correct itself.  The reason that the protocol is so important is that once they started the first Block in the Blockchain, the system would begin running on its own from 1/3/2009, until the end of the Internet.

It fascinates me that this system would start running in 2009 and then continue running on its own up until present day. (I am thinking that this blog will still be up when the internet is about to crash. )  That really is the whole point:  Create the system so it all runs in perfect harmony and have it run without having to rely on a trusted 3rd party. That is why this invention is so important.

The biggest issue that had plagued digital currency in the past was the “double spend” problem.  It was the issue where a person would spend $10.00 in the digital currency and then right away go and spend the same $10.00 on something else. There was no central ledger to keep track of which transaction was which.  That is the simplest explanation that I can have to explain that.

I hope that this helps you further understand what the bitcoin protocol is and how it relates to the rest of the bitcoin world. Be sure to check out the other posts in the Bitcoin 101 Series and stay tuned next time when we dive even deeper into the world of bitcoin!


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  1. Nice piece and a very wonderful example for everyone to understand. Even those that don’t know bitcoin. Keep it up Bro.