How does it Work?
The backbone of Bitcoin is the blockchain (also known as a decentralized public ledger). In essence, the entire system is nothing more than ones and zeros stored on hard drives around the globe. All these connections are done through the internet protocol which then facilitate a public consensus driven by cryptography.
Behind the scenes, the network consists of computers. Each computer will keep a software ledger to interact in the network. The network is constantly solving a cryptographic math problem in a race to generate blocks. On average a solution is found about every 10 minutes. The computer who solves it generates the next block, bundles the transactions from the previous 10 minutes, gets rewarded with a fixed number of new bitcoins, and outputs this information as a new block on the blockchain. The rest of the network confirms the solution while also documenting the solution in their own record. Each new block is linked cryptographically to the previous block; therefore, no one can change a block in the ledger without also changing all the blocks ahead of it up to the most recent block.
Behind the scenes, the network consists of computers. Each computer will keep a software ledger to interact in the network. The network is constantly solving a cryptographic math problem in a race to generate blocks. On average a solution is found about every 10 minutes. The computer who solves it generates the next block, bundles the transactions from the previous 10 minutes, gets rewarded with a fixed number of new bitcoins, and outputs this information as a new block on the blockchain. The rest of the network confirms the solution while also documenting the solution in their own record. Each new block is linked cryptographically to the previous block; therefore, no one can change a block in the ledger without also changing all the blocks ahead of it up to the most recent block.
Used under Creative Commons from Dr. Constantin Gurdgiev via True Economist Blog)
Learn More
How Bitcoin Transaction
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Bitcoin Under the Hood
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Chp 2: How Bitcoin Works
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Bitcoin Wiki
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