THE BITCOIN BLOCKCHAIN
The bitcoin blockchain and all the parties that are involved in making it work is the other piece of magic that secures bitcoin transactions. This is what guarantees Bitcoin’s place in the world as a king of wealth.
The bitcoin blockchain is fundamentally a very long list of transactions of all the public bitcoin addresses in the bitcoin eco-system which currently have (and have previously had) bitcoins in them. It includes data on the amount of bitcoins every bitcoin address currently holds and has held since its creation. Currently, on average, around every 10 minutes, this list of transactions is updated in a process known as mining. Since the very first group of transactions back in 2009 (known as the genesis block), this list of transactions has been updating almost non-stop. An exact copy of this list of transactions is held by a large decentralized group of computers currently numbering in the thousands and distributed all throughout the world (known as nodes). Any individual person can choose to download a full copy of this blockchain or ‘list’ should they so choose when using bitcoin and therefore become a node. They can do this by using bitcoin wallet programs that use it (such as Bitcoin Core). Becoming a node simply means your computer is constantly connected to the network, has a full copy of the bitcoin blockchain, actively collects transaction data that bitcoin users broadcast, constantly verifies that these transactions comply with certain rules, before sharing this information with other computers on the network (think of a node as kind of like being a ‘seed’ in a peer to peer BitTorrent file sharing network). It is the nodes that check the transactions are legitimate and the bitcoin private keys are correct. For ease of use, most people use bitcoin wallet programs (like electrum) which communicate with trusted nodes in the network, rather than become a node themselves.
The other key category of computers in the bitcoin blockchain are known as miners. Miners are often also nodes (although not always), and are the group that locks in the next block of the blockchain. Miners are computers (either individuals, groups, or large organizations) that take transaction data from the nodes which have been organised into blocks, and then validates them. They do this by performing random yet purposeful computations, to try to solve a mathematical calculation (or puzzle) required by the bitcoin open source program which all miners run. The difficulty of this calculation is adjusted every 2 weeks automatically by the program to ensure that regardless of how many computers there are trying to solve the calculation, on average, the calculation is solved every 10 minutes. The first miner running this program which correctly solves this calculation is awarded with a certain number of new bitcoins (currently 12.5) deposited into a new bitcoin public address which they own. This miner can then update and broadcast the blockchain with the next block (or list of transactions) which now also includes their new bitcoin address with the 12.5 new bitcoins in them. A new block of transactions is thus validated and added to the blockchain. Consecutive blocks are added to the blockchain in this same, random, math based manner. Any bitcoin mining fees which users have selected in their transactions are also awarded to the miner. The miners have the discretion to not include any transactions they choose in the next block of the blockchain. They usually do this if the fee is too low. Without exception though, provided you have included a large enough transaction fee and your bitcoin private key is correct, your transaction will be included in a future block of the blockchain (because another miner will pick it up if not this one).
Through this general process, the integrity of the bitcoin blockchain (or list of transactions) is assured. As long as the miners running the network are decentralized (ie. not more than half are colluding with each other), and no single miner controls more than 50% of the processing power of the network; based on mathematical laws, the bitcoin blockchain (or list of transactions) will always be updated correctly. No single miner or group of miners with less than 50% of the processing power of the network can disrupt the network because the majority of the miners will always update the blockchain with the correct list of transactions (and not accept the disruptive miner’s block additions). The majority is always considered correct.
The bitcoin blockchain is secure because the combined processing power of all the computers running the network is simply too high for any individual, group or organization to overpower. Bitcoin’s value is secure because the protocol or programs that make it work have features in them which ensure that bitcoins are only added to the network in a specific manner designed to maintain the stability of the currency. Specifically, no more than 21 million bitcoins can ever be mined and coins cannot be mined faster than the set amount of around once every 10 minutes. Due to all these characteristics of bitcoin, even if you think the future will reveal bitcoin to be breakable or imperfect, it should still be regarded as being the most secure digital currency currently available among all the alternatives.
