A Story in a layman’s Term — Simple Explanation of Complex Technology
Beautiful Mrs. Blockchain meets Mr. Log — who keeps records of all transactions that was ever verified on Bitcoin Network. [please remember that Bitcoin is the entire system ‘B’ when the transactions are executed and ‘b’ bitcoin is the digital currency — hmm.. Crypto-currency is her strong point].
The Transactions are collected in ‘Blocks’. ‘Blocks’ are her Special agent who keeps running randomly here and there to solve complex mathematical equations every 10 minutes… This Mission / process is called ‘Mining’. The agent who solves the ‘Block’ gets rewarded for his work. The agent tries to combine all his intelligence and networks including computational power [hash-power] to get to the New Block.
The New Block has information about the previous Block or in other words it is the superset of the old+new Block — this is updated on the Bitcoin Network. The Original Block or the Starting point of Block is known as Genesis a.k.a. ‘Genesis Block’.
Let me make it simpler:
Say Genesis Block was ‘A’ Subsequent Block would be ‘A’+’B’ [Here A preceded B] Next would be … ‘A’+’B’+’C’…’n’ [Here A preceded B.. B preceded C… n ] Block forming a tree diagram like pattern known as “Merkle Tree”.
Mrs. Blockchain needs to know more about Block’s [Secret Agent] Background. Each Block Contains Family identity known as “Time-stamp”, It’s Previous generation’s details called “Prev_Hash” — just to make sure everything’s in order, The Combination of all except the transaction data is hashed into the “Block Hash” — it’s the proof that the other parts of the header have not been changed, and then is used as a reference by the succeeding block, “Nonce” [ is an arbitrary number that may only be used once], “Tx_Root” known as Merkle Root is the short or reduced nickname of the sets of transactions confirmed by the Block forms the ‘Body of the block’.
So, every Secret agent [Block] Contains “Prev_Hash”, “Time Stamp”, “Nonce” and “Tx_Root” … their entire work pattern is summarized into “Merkle Tree”.
As all secret agent [Block — Miners] compete with each other to find the next new transaction block with the longest nonce and the sad part is all those who failed to find the longest new block is punished by discarding their work that is shorter blocks are removed as convicted as “extinct block” or “orphaned blocks”. This is continuously updated every 10 minutes.
Their work which is approved is submitted to the network and it’s passed on to each client or system in the network known as nodes by means of peer-to-peer networking [Torrent Files works on peer-to-peer network concept]. All the transaction harsh is available on Blockchain.info [Mrs. Beautiful a.k.a Mrs. Blockchain Network].
Now … Let’s understand how bitcoin transaction takes place…
The Queen of Ferrari is planning to buy Antique painting worth BTC [Bitcoin] 7,000. She logs into her system and creates a account known as bitcoin wallet — then she buys BTC 7,000 from an unknown seller and then makes payment to painting seller. This is how the transaction takes place.. The System prepared on Bitcoin Network by Mrs. Blockchains checks the Balance of the Seller who is willing to Transfer BTC to the Queen.
Note: Bitcoin has 3 details — the seller, the buyer and a signature. The Queen’s wallet and the seller wallet is connected to all other peer-to-peer bitcoin network participants. The Seller Wallet passes the information of Bitcoin Transfer and all the nodes in network receives the notification that Seller wants to Transfer BTC to Queen.
Now, the Security checks needs to be done so each and every participant checks whether the listed “Bitcoins” exist, and whether the signatory is the Seller is valid. This payment is still unconfirmed as the Secret Agent [Block Miners] work to find the longest valid block and to confirm this transaction.
So, it takes about ten minutes for them to solve this complex mathematical block hash and to come-up with the new transaction block hash containing the details of the previous Block. Then when a new transaction block is announced the Transaction is validated and updated in all nodes and all miners agree to its integrity. Then this transaction gets confirmed. In the same way Queen pays BTC 7000 to buy the painting.
You should also know that One Bitcoin is divisible down to eight decimal places [i.e, .00000001]. There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin system.
The value of “1 BTC” represents 100,000,000 of these. In other words, each bitcoin is divisible by up to 10 power 8. How much hashpower would I require to surely mine one block per day? It’s approx. 200653409601322281662/86400 = 2322377425941230 i.e, you’d need about 931 TH/s hashpower. This is a ridiculous amount of mining power to just mine one block… As it gets updated every 10 minutes it is practically impossible to de-fraud Mrs. Blockchain and the Bitcoin Network. Therefore, The blockchain records every single transaction — of present and past — and the ownership of every single bitcoin in circulation.
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