But what exactly is blockchain and how does it work?
Read on to find out.
A blockchain is a digital ledger that is recorded on a distributed network of computers around the globe. Transaction information is stored in blocks that form a chain. Hence, the term “blockchain.”
In simple terms, a blockchain is a distributed database that contains transactional information that cannot be modified after it’s recorded.
In the case of Bitcoin, financial transactions are stored on the Bitcoin blockchain, allowing anyone to publicly view and verify all bitcoin transactions in real-time using a block explorer.
To update the digital ledger, all network participants (nodes) have to agree that all transactions going into a block are correct based on the rules that govern the network.
The Bitcoin network uses a Proof-of-Work (PoW) protocol to verify transactions and achieve distributed consensus, i.e., to make sure everybody agrees on the current state of the blockchain. In the Bitcoin network, so-called “bitcoin miners” are the network participants who process and validate transactions, adding new blocks to the Bitcoin blockchain.
Open blockchains, such as the Bitcoin blockchain, operate without the involvement or required approval of a central authority, allowing anyone with an Internet connection to participate by running the Bitcoin software.
Blockchains differ from other databases primarily due to their decentralized nature, making it very difficult to alter or tamper with the information recorded in blocks. As a result, blockchain technology has become very popular among enterprises and financial institutions as it can be deployed to create safer and more robust systems.
Transactions on the Bitcoin Blockchain: Here’s How They Work
Sending bitcoin from one wallet to another is pretty simple. What goes on in the background to make that happen, however, is a bit more complex and part of Bitcoin’s brilliance.
Here’s the journey of a bitcoin transaction on the blockchain.
- A user broadcasts a request to send bitcoin.
- The Bitcoin network receives the request for a transaction.
- Nodes authenticate the transaction via the consensus mechanism.
- The relevant transaction data is added to a block.
- The entire block is added to the chain after a threshold of confirmations is achieved.
- The transaction is finished and permanently added to the ledger.
While blockchain may be more difficult to comprehend than Bitcoin itself, the most important thing to understand is that the Bitcoin blockchain is an immutable public ledger that verifies and records all bitcoin transactions.
To make your first transaction on a blockchain, download the Relai app today and buy bitcoin.