In our previous article, we talked about the ideology of Satoshi Nakamoto when he first created Bitcoin. We also touched upon how Bitcoin has become so much more in just a few years in regards to both technology and the monetary aspect.Over the course of several articles, we will talk about the technology associated with Bitcoin, and why it could prove to be invaluable the global population. But let’s start at the beginning first, shall we?
The Bitcoin protocol revolves around the blockchain, a tool acting as an open ledger for every Bitcoin transaction ever taking place. In fact, the blockchain lets you trace back to the very first Bitcoin transaction ever created on January 12th, 2009, when Satoshi Nakamoto sent 10 Bitcoin to Hal Finney, one of the very first individuals to be introduced to Bitcoin.
As you can imagine, the blockchain opens up a vast array of possibilities that could be beneficial to both current and future generations. Even just the idea of having an open ledger containing all of the transactions conducted on a global scale over the Bitcoin network is just staggering. And in saying “open ledger,” I do mean that anyone in the world can see any Bitcoin transaction ever created, without needing any prior technological knowledge.
Because the blockchain is freely accessible – without having to rely on any central authority, government or institution to keep the service up and running – it also enables developers to build applications which make use of the blockchain in one way or another. If the blockchain can store all transaction data without any issues, imagine what other types of data it can store in the future? But we will get back to that in a future article.
If there is no central authority guaranteeing the stability and upkeep of the Bitcoin network, how does it keep operating at any given time? The answer to that question is quite simple really. Do you remember how I mentioned that the Bitcoin network is decentralized, as all of the Bitcoin users are a part of the network? The same can be said for keeping the blockchain up and running: as long transactions can be broadcasted to at least one other node on the network, the blockchain will keep getting longer and bigger in size.
Speaking of Bitcoin nodes – that are an integral part of the Bitcoin network and the blockchain – they do not just broadcast transactions either. Bitcoin nodes also validate each and every transaction broadcasted to the network. Once a majority (51%) of the network nodes receives the same transaction, it is declared “valid” and added to the blockchain.
By now, you are probably wondering how a Bitcoin transaction gets added to the blockchain. Instead of adding every transaction individually, lots and lots of transactions are bunched up in what we call “blocks.” Every “block” is a list of transactions broadcasted to the network and waiting to be validated. Once the network validates a transaction, these “confirmed” transactions will be added to that new block, which is added to the blockchain.
It is also important to note that every Bitcoin node stores its private copy of the blockchain. This copy is synchronized with the network at regular intervals, and only validated transactions will be added to this private copy. Furthermore, this also removes the possibility of a malicious individual trying to “fake” a transaction that occurred in the past, as it was not present in the blockchain at that time, and is therefore not valid.
While Bitcoin transactions are not “physical” in any way, you could go as far as saying that the Bitcoin blockchain is the only place where these transactions exist in a physical form. Even though you can only see the inputs (received transactions) and outputs (sent transactions), the blockchain is a physical representation of the Bitcoin network.
Last but not least, I want to share a very important fact about the blockchain with all of you. Because so many copies of the verified blockchain exist – which make it nearly impossible to “fake” transactions – there is one golden rule to keep in mind : the blockchain does not, cannot and will not lie.
In our next technical Bitcoin article, we will talk more about the potential use cases for blockchain technology.