The bitcoin Blockchain Explained in Three Easy Steps For Noobs
Anyone who has ever had to deal with bitcoin comes across the blockchain. For most people, it’s not clear what the term means. The good news is you don’t need to understand it to use bitcoin. But, there is no harm in learning more about the blockchain. Here is a simple explanation, in three easy steps, without the need for complicated terms.
Step 1 – First, there is a transaction.
When two people send bitcoin to each other, it’s called a transaction. It’s almost the same as when you buy something in a shop. The main difference is that in the store, the payment goes through a third party. Usually, a bank or a card company handles the transfer of the money. With bitcoin, the money goes directly from the sender to the receiver.
This transaction is transmitted to all the computers on the bitcoin network. These computers, called nodes, will check if the payment is valid. The people who operate the nodes are called miners.
When a miner adds a transaction, the other nodes have to accept it. That will ensure nobody cheats the system. For the most part, you don’t want the same bitcoin sent to two people at the same time. The verified transaction goes into something called a block.
Step 2 – Then there is a block.
In simple words, a block is a list of recent bitcoin transactions. It also contains a difficult math problem that must be solved, which you can’t answer without a lot of computing power. When a bitcoin miner solves the problem, they get rewarded with new bitcoin.
You may wonder why there is a mathematical problem attached to the block. The reason is that it takes resources such as time and electricity to solve the problem. So, you cannot just jump in and add a block; you have to find the answer. The node (or group of nodes) that solves the problem first gets paid new bitcoin for the effort. That block is then added to the blockchain.
Step 3 – And then, there is the blockchain.
Finally, we arrive at the blockchain. The blockchain contains all the blocks previously created, which includes every transaction that ever happened. In effect, that’s what the blockchain is: a long list of bitcoin transactions. As more payments occur, the blockchain grows.
To recap: all transactions are sent to nodes on the bitcoin network. The nodes validate the transactions then add them to a block. The blocks are joined together to form the blockchain. That’s it!
