Dissecting Bitcoin white paper** Easy understanding
A peer to peer version of electronic cash which allows transfer from one account to another without intervention of any government, corporate giants, or third party.
Mining and Transactions
Proof of Work is the consensus algorithm used by Bitcoin. Every transaction is validated by Miners; before that miners solve a cryptography algorithm to get the chance to validate a transaction.
Every block has a timestamp, hash from previous block and transaction details. A SHA256 hash is created for every block. Miners try to find a nonce(number) which when combined with block hash gives the output. The output is also a hash and the difficulty level is set according to the time taken in the past to validate blocks. The miner who solves this math question of finding the right number wins the competition among all other miners and is rewarded to validate the block.
Blockchain is an immutable database i.e you cannot manipulate data that’s already in the blockchain. Every block is assigned a hash. Hash is unique. If you change a single letter in the block, the hash would be completely different. Blockchain is a chain of nodes where the next block uses data from previous blocks so that the next blocks could be identified. Hash of a block is calculated depending on the timestamp and all transaction data in that particular block.
Double spending is a hacker trying to use a single transaction twice. The likelihood of a secret block being inserted into the blockchain is very slim because it has to be accepted and verified by the network of miners which means the whole blockchain network.
51% attack — The most significant risk for blockchain comes in the form of 51% attack which can occur only when a miner controls more than 50% of the network.
A block after being validated by a miner is broadcasted to the entire network and then is accepted by the network only if all transactions are valid in the block. If two nodes broadcast different versions of the next block simultaneously, then the longest chain of nodes will be later accepted by the nodes. Nodes always consider the longest chain to be the correct one and keep working on extending it.
Reclaiming Disk Space
Once the chain of blocks starts to increase with size, the space acquired by them also increases. Increasing disk space is an additional cost and overhead to the system. In this case, the nodes can just save the important data which can retrieve all details if needed in future, and drop other data . Merkle Tree is the algorithm used here which calculates the root hash to be stored by combining all child hashes.
Simple Payment Verification
It is possible to verify payments without running a full network node. Like Bitcoin wallets, they are relatively light weight in terms of the processing that is expected out of them. A user is only expected to have a copy of the block header for the longest proof of work chain. If there is any doubt, then the user can get the block header by querying other network nodes. This block header can then provide us the Merkle’s branch linking the transaction to the block.
Blockchain networks track and permanently store all transactions done publicly. This is similar to traditional stock exchanges where time and size of the transactions are recorded but not the information about the parties involved. What one could see during a bitcoin transaction is the hash address for the owners. No owner identity like name is recorded or revealed.
Hope this was helpful. Happy learning. Cheers :)
Please look at these articles as well if you would like to know more about Web3 :
What is Web3.0 ?
Web 3.0 enables a future where distributed users and machines are able to interact with data, value and other…
Decentralized Autonomous Organization — What, Why, Where ?
A DAO, or a Decentralized Autonomous Organization, is a company set up to run by code on the blockchain. The people who…
Proof of Work and Proof of Stake
Proof of Work and Proof of Stake are the two major consensus mechanisms/algorithms used to verify the transactions in…
Proof of Work Algorithm
Miners solve a mathematical problem to get the chance to validate a transaction , so that they can earn reward. In this…