How Bitcoin Works? From Transactions to Block Addition

This article is intended to help you understand the working of bitcoin in plain simple words. Here is what you need to know regarding the working of this asset if you are new to this space.

Bitcoin is a global digital currency that is based on the revolutionary blockchain technology. Unlike central banks, there is no central authority in the global bitcoin network that controls this asset. Instead, there is a presence of nodes in the network that maintain and support it.

Unlike centralized systems where just one body maintains the record of all the happenings of the network, each node in the bitcoin network has a record of all the transactions that have been taking place on the network, hence the word decentralization.

The record of transactions is kept in blocks that are formed after an average of ten minutes in the network. Once a block is formed with the information regarding the transactions contained in it, it becomes immutable, meaning it cannot be changed. A chain of blocks is thus formed in the network, hence the word blockchain. Every node has the access to the blockchain data so that a fabric of transparency is obtained.


Transactions that are entering the network are first kept into an unmined pool, meaning they are yet to be added in a block. Since there is no central party to verify the transaction and add the block, this task is done by the nodes. But who will add the block to the chain? In order for a node to add the next block into the chain, it has to solve a cryptographic puzzle before anybody else. Whoever solves this puzzle first becomes the leader of the network and gets to add the block in the chain. A reward is also given to the node who solves the puzzle first. The winner node takes the unmined transactions from the pool and adds them to the new block. Hence, the blockchain keeps growing. The average time for block addition in the bitcoin network is around 10 minutes.

The total supply of the bitcoins in the bitcoin network is capped at 21 million but not all of these bitcoins are in circulation at the moment. Miners are the entities that get newly minted coins in the form of the reward and hence, new coins are brought into circulation in the network by the miners.

The technology underlying bitcoin is blockchain. It is the technology that introduces the features of decentralization, immutability, and trustlessness in the bitcoin network. Although this technology is still pretty nascent and there are a lot of problems associated with the bitcoin world, it will be interesting to see how this world evolves from here on as the need for digital currencies grows.

SEE ALSO: How Bitcoin Mining Works?

Ahsan Khalid

Blockchain Developer. An Electrical Engineer with majors in software development. I present forward my insight regarding the latest happenings of the blockchain world. All views on my articles are my own. Email: ahsan@blockpublisher.com or editor.news@blockpublisher.com

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