How does the Bitcoin Blockchain work?

A distributed ledger

The blockchain allows the Bitcoin network to have shared database through a decentralised ledger. It is publicly available and records each and every transactions that occurred on the network as well as the balance of public addresses.

The Bitcoin blockchain is a series of blocks that holds transaction data of approximately 10 minutes of network activity. Miners create new blocks of transactions by solving a mathematical formula.
By doing so, the network rewards them with freshly mined Bitcoin.

Combination of data blocks

Each block records the information of multiple transactions including:

  • The time
  • Transaction identification numbers
  • The sender’s public address
  • The recipient’s public address
  • The amount sent
  • The mining reward
  • A unique id code called hash

Each blockchain block stores every Bitcoin transaction that was created and confirmed by the network during a ten minute period.
Once a new block is mined, it is added to an immutable public distributed ledger; this is the blockchain: a chronological combination of data blocks.

Blockchain technology offers three tangible benefits compared to centralised databases:

  • Transparency: Users have perfect knowledge of transaction information.
  • Decentralisation: No one has to rely on any third party for the system to work
  • Immutability: Once a block is mined it becomes permanent.