What is Blockchain?

A blockchain is the foundation of Bitcoin’s technology. It serves as a distributed ledger that records every transaction ever made on the Bitcoin network. It is transparent, secure and decentralized.

You can think of a blockchain as a digital notebook. Each page (a block) contains a list of transactions. Once a page is filled, it’s locked and linked to the previous one, creating a continuous chain of blocks. This makes the blockchain a permanent and unalterable record of all transactions.

The Bitcoin Whitepaper explains how Blocks are linked to each other. Blocks in the past can not be changed without changing all the other following blocks.

How does a Blockchain work?

Each block in the chain is connected using hashes—a secure method that makes tampering with the data nearly impossible. Bitcoin miners play a critical role in this process. They compete to find a Nonce that leads to a valid hash, often misunderstood as solve complex mathematical puzzles while it’s more like guessing numbers or a lottery game, and the winner gets to add the next block to the chain.

This process also determines the order of transactions, ensuring everyone agrees on a single version of the ledger. In return for their efforts, miners are rewarded with new bitcoin and transaction fees.

To understand how this works in real life, compare it to traditional banking. If you transfer money within the same bank, it’s simple—they update their internal ledger. But if you transfer to another bank, multiple systems must reconcile the transaction. Bitcoin simplifies this by creating a unified, public ledger where transactions are final and irreversible.

Features of the Bitcoin Blockchain

Transparency

The Bitcoin blockchain is entirely public. Anyone can view it using tools like block explorers, or they can run their own node for direct access. This openness lets users verify the network’s transactions and circulating supply without relying on third parties.

Decentralization

Unlike traditional systems that store data in one place, Bitcoin’s blockchain is distributed across thousands of nodes worldwide. This makes it resistant to censorship, hacking, and single points of failure. Everyone can download the entire Bitcoin Blockchain that at the moment of writing is less than 1 Terabyte in memory space.

Nodes play a crucial role. They maintain the ledger, validate transactions, and enforce Bitcoin’s rules. For example, if someone tried to change Bitcoin’s supply cap from 21 million to 42 million, only nodes running the updated software would recognize the change. If the majority of nodes reject the update, the change fails. This ensures that no single entity can unilaterally alter Bitcoin’s rules.

Immutability

Once a block is added to the chain, it cannot be changed. This is thanks to the connection of following blocks in Bitcoin’s consensus mechanism. Minor updates, called “soft forks,” can be introduced without disrupting the system, while major changes, known as “hard forks,” require the agreement of the entire network.

Proof-of-Work (PoW)

Bitcoin’s mining process relies on a mechanism called proof-of-work (PoW). Here’s how it works:

• Miners use specialized computers to solve puzzles (Guess Nonces), producing a valid hash.
• The first miner to solve the puzzle gets to add a new block and receives a reward of new bitcoin and transaction fees.
• PoW ensures that mining requires significant effort and energy, which secures the network. This process isn’t static. Every two weeks, Bitcoin adjusts the mining difficulty based on the total computational power in the network. If too many miners join, it becomes harder to mine. If miners drop out, the difficulty decreases. This ensures that blocks are created roughly every 10 minutes. This is an extremely important mechanism that avoids that blocks would come in faster if just enough miners would be plugged in into the ecosystem.

Security through Energy

PoW also acts as a defense mechanism. Attacking the network would require enormous computational resources, making it more profitable for miners to play by the rules and earn rewards honestly. This balance of incentives keeps the network secure and decentralised.

Final Thoughts

• A blockchain is a digital ledger that records all Bitcoin transactions
• Public and Decentralised: Bitcoin’s blockchain is maintained by thousands of nodes worldwide. Everyone can run a Node.
• Proof-of-Work ensures security by requiring significant computational effort