Bitcoin and the Blockchain

Increasingly leading a life outside of cryptocurrency, blockchain technology has generated hype in all sizes and shapes. Open or private, permissioned or permissionless, many with their own consensus algorithms, and some even developed or supported by well-known companies in the technology and finance sectors, the array of blockchain applications and solutions is exploding at a pace thats hard to keep up with.

But the concept of a blockchain originated, of course, with Bitcoin. And unbeknownst to many adopters. Bitcoins original blockchain provides advantages that no alternative system does.

To understand why. lets first look at what a blockchain actually is.

Underlying Technology

The “block” aspect of a blockchain refers to blocks of data. In Bitcoin. these blocks are bundles of currency transactions, as well as some additional information about the blocks themselves, like the time at which they were mined.

Each of these blocks is “hashed.” meaning that its scrambled and condensed into a compact and seemingly random string of numbers. And this string of numbers is then

included in the next block. This next block is in turn hashed as well, and this hash is included in the block after that. This links all blocks together, creating a chain.

Cryptocurrency Bitcoin and virtual financial currency market exchange. Virtual future money.

All of these blocks are shared over a network of computers, which all verify the integrity of a new block and its contents, and reconstruct the blockchain from it. Since all of these computers apply the exact same protocol rules, they all reconstruct the exact same blockchain. As such, the entire Bitcoin network reaches consensus over the state of the blockchain. a state which is updated about once every 10 minutes as a new block is found (for more, see our guide to mining on the previous page).

Crucially, this consensus is reached without the need for a central intermediary. Bitcoins decentralized nature — in which tens of thousands of peers reconstruct the blockchain themselves — helps make the blockchain relatively censorship- resistant

Furthermore, the network doesnt only achieve consensus every 10 minutes. It also ossifies the history of consensus. Because the unique identifier of each block — the hash — is included in the next block, all blocks are not just linked but also ordered chronologically.

In Bitcoin. changing what older blocks look like, by removing transactions, for example, is impossible. Due to specific mathematical requirements, the changed blocks would be entirely rejected by the system. The only way to rewrite history, therefore, is to create a whole new chain of blocks.