A revolutionary concept requires a revolutionary technology. Utilizing cryptography and mathematics, the need for a third party to verify transactions is eliminated. Any wallet address on the network will be assigned two cryptographic keys namely the public key and the private key. Both these set of keys are required to complete any transaction.

A set of transaction is recorded on hash table with the hash forming the basic building block of the blockchain. In the first block also frequently referred to as the genesis block, a transaction is recorded and an accompanying hash (a sequence of numbers like an address) is generated. This is then used to form the next block with subsequent transactions generating new hash tables and numbers. As a result, all the blocks are linked together in a chain by cryptographic hash numbers. If there is an attempt to alter any one of these blocks, the hash number will not be aligned with the number that was cryptographically generated. This would invalidate the block and make it an easy target for all to identify.

Where do the miners feature in this process? Each new block that is being built needs to generate a hash. A new hash is formed when the previous hash and a nonce (an arbitary number that is used only for this occasion only) is attached to it. Miners need to solve this mathematical puzzle to generate the block and its new hash and record these on the distributed ledger. As the chain gets longer, the difficult in solving the puzzle increases exponentially. Miners get rewarded with the transaction fee if they are successful in solving the puzzle first before others.

The Bitcoin algorithm has been pre-designed to allow a maximum of 21 million coins only once all the mining activity is completed in the year 2140. At the time of writing, there are more than 17 million Bitcoin in circulation. Miners will initially get rewarded with 50 Bitcoins for each block and this value halves over time. It is expected that in May of 2020, a third reward halving event will take place with miners getting 6.25 Bitcoins for every block that is solved from then onwards. This diminishing rate of return is intentionally designed in the algorithm to produce scarcity while minimizing the effect of inflation when new coins are mined. Naturally, this creates a common comparative of Bitcoin to gold which is also scarce and precious and acts as a hedge in times of economic uncertainty.

So, there you have it…the basics of the Bitcoin blockchain and why it holds great promise for humanity. At CryptoDurian, we invite you to experience the power of the Bitcoin blockchain by taking the next steps here.