Transaction Block Chain

What is a Blockchain?

Understanding Blockchains

A blockchain is a public ledger of all Bitcoin transactions. When new transactions are made, “blocks” of transactions are added to the sequential blockchain.

TIP: Blockchain technology at the heart of Bitcoin is common to most cryptocurrencies. On this page we’ll use Bitcoin’s blockchain as an example, but keep in mind the general concept applies to most (but not all) cryptocurrencies.

The Gist of Blockchains and Bitcoin

Understanding the points below will help you understand how Blockchains work.

  • In order to spend or receive Bitcoins, a Bitcoin user must create a transaction and broadcast it to the entire Bitcoin network.
  • For a transaction to be successful it must be added to the blockchain (a public digital ledger).
  • “Miners” are those in the network competing to collect transaction data, verify transactions against the existing blockchain (existing ledger), and solve a cryptographic puzzle that allows them to add a block of recent transactions to the blockchain (receiving new coins as a reward).
  • The fact that so many have the same record, and that so many are trying to confirm the same transactions, helps to ensure each sequential block of the public ledger is accurate.
  • Once a block is added to the chain it is there forever and becomes public record.

In other words, the blockchain is a public ledger of all transactions in a cryptocurrency network, and the Bitcoin blockchain is specifically a record of all Bitcoin transactions.

Below we describe in more detail how miners help Bitcoins go from transactions between peers using digital wallets to permeant recorded blocks of transactions in the public blockchain.

TIP: Its called cryptocurrency because many aspects of the above process use encryption. We won’t get into the details here, but generally the transaction sent out uses encryption, the transaction recored to the block chain uses encryption, and the public ledger uses encryption. So even though so much is public, it is at the same time private as well.

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