Introduction
Blockchain serves as Bitcoin's public ledger, providing a secure and immutable record of all transactions. This decentralized system prevents double spending and ensures transaction integrity through cryptographic verification.
How Blockchain Works
- Decentralized Validation: Each Bitcoin node independently maintains its own copy of the blockchain, validating blocks based on consensus rules.
- Consensus Mechanism: Nodes agree on the validity of blocks to maintain network integrity. Discrepancies are resolved through predefined protocols.
Blockchain Structure
Block Composition
- Transactions: Bundled into blocks, each containing a Merkle root—a hash representing all transactions in the block.
- Chaining Blocks: Every block references the previous block's hash, creating an unbreakable chain. Tampering with one block invalidates all subsequent blocks.
Transaction Chaining
- Inputs and Outputs: Bitcoin transactions link together, where each input refers to an output from a prior transaction.
- UTXOs (Unspent Transaction Outputs): Only UTXOs can be spent in new transactions, ensuring no satoshis are double-spent.
Proof of Work (PoW)
Securing the Network
- Hash Thresholds: Miners must produce a block hash below a target value, proving computational effort.
- Difficulty Adjustment: Every 2,016 blocks, the network recalculates difficulty to maintain a consistent block time (~10 minutes).
Fork Handling
- Temporary Forks: Occur when multiple blocks are mined simultaneously. The longest chain (most PoW) becomes the accepted version.
- 51% Attacks: Theoretical scenario where a miner gains majority hash power to alter transaction history.
Block Height and Forks
Understanding Block Height
- Genesis Block: The first block (height 0) in the blockchain.
- Forks: Divergences when blocks share the same height. Resolved when one chain accumulates more PoW.
Types of Forks
- Hard Fork: Permanent divergence (e.g., Bitcoin Cash). Requires all nodes to upgrade.
- Soft Fork: Backward-compatible changes (e.g., SegWit). Non-upgraded nodes still function but may miss new features.
👉 Learn more about Bitcoin forks
Transaction Data
Coinbase Transactions
- Block Rewards: Miners receive newly minted bitcoins + transaction fees.
- Maturity Period: Coinbase outputs require 100 confirmations before spending.
Merkle Trees
- Efficiency: Allows lightweight clients (SPV) to verify transactions without downloading the entire blockchain.
- Collision Risk: Rare but possible if duplicate transactions exist in a block.
Consensus Rule Changes
Hard Forks vs. Soft Forks
| Type | Upgrade Required | Chain Split | Example |
|---|---|---|---|
| Hard Fork | Mandatory | Permanent | Bitcoin Cash |
| Soft Fork | Optional | Temporary | SegWit |
👉 Explore Bitcoin's consensus history
Detecting Forks
For Nodes:
- PoW Check: Non-upgraded nodes alert if a competing chain has +6 blocks more PoW.
- Version Monitoring: Nodes detect outdated rules by comparing block/transaction versions.
For SPV Clients:
- Multi-Node Validation: Cross-check block heights across nodes to identify forks.
- Version Awareness: Ensure transactions adhere to current rules.
FAQ
1. What prevents double spending in Bitcoin?
- The blockchain timestamps and verifies each transaction, making it impossible to spend the same UTXO twice.
2. How does PoW secure the network?
- Miners compete to solve cryptographic puzzles, making tampering economically infeasible.
3. Can a fork be reversed?
- Hard forks are irreversible. Soft forks may revert if adoption fails.
4. Why do coinbase transactions have a 100-block wait?
- To prevent miners from spending rewards before block stability is confirmed.
5. What’s the difference between a block’s height and its hash?
- Height is its position in the chain; the hash is a unique cryptographic fingerprint.
6. How do SPV wallets verify transactions?
- They request Merkle proofs from full nodes to confirm inclusion in a block.
Key Takeaways
- Blockchain’s decentralization eliminates single points of failure.
- PoW ensures trustless consensus but requires significant energy.
- Forks enable protocol evolution but demand careful coordination.
For deeper insights into Bitcoin’s technology, 👉 visit our advanced guide.