Back

A simplified view of Bitcoin and Blockchain’s inner workings

Tackling the two most widely known crypto topics

Bitcoin’s blockchain is a database that records the flow of its native currency, bitcoin. Bitcoin’s blockchain is a distributed, cryptographic, and immutable database that uses proof-of-work to keep the ecosystem intact. Let’s do a brief overview of these terms to dive into the inner workings of Bitcoin’s blockchain.

Distributed refers to the way in which computers access Bitcoin’s blockchain. The great thing about Bitcoin’s blockchain is that it is decentralized, meaning any computer in the world can access it. Every transaction made on the blockchain is transparent, so everyone is on a level playing field.

Cryptographic in relation to Bitcoin is what allows the computers building Bitcoin’s blockchain to collaborate in an automated system of mathematical trust. When a transaction occurs on the chain, there is no subjectivity; it is confirmed by complex math equations that take supercomputers to solve.

Immutable means that information on Bitcoin’s blockchain is permanent and cannot be erased. In most digital environments, things can be erased. Take your search history for example. Bitcoin leverages this feature of immutability as it creates a system of trust in a world of potentially untrustworthy people.

Proof-of-Work is what ties these other terms together and gets a little more complicated. Proof-of-work, or PoW, deals with how transactions are grouped in blocks, and how those blocks are chained together to make Bitcoin’s blockchain. The computers that build Bitcoin’s blockchain use PoW to get the privilege to add blocks of transactions to Bitcoin’s blockchain. Each time a computer adds a block to the chain, they receive bitcoin currency for doing so, which provides the incentive. This process of “mining” bitcoin is what grows the blockchain.