The bitcoin blockchain is essentially an enormous, shared, encrypted list of which addresses hold which bitcoin balances. Every new block represents the latest update to account balances after some further mining takes place or a transaction occurs where bitcoin is exchanged. When a transaction is submitted to the bitcoin network, the information is passed on through all bitcoin clients at the same time through the blockchain.
|What Does the Bitcoin Blockchain Record? | By investopedia.com
The blockchain network is designed to make double-spending very difficult, though breaches have occurred in the past. In this way, it functions much like a public ledger, accounting for economic transactions and providing some verification that all bitcoin users are equipped with the same information.
Records in Each Block
Blockchains consist of a series of individual blocks, each in chronological order based on the order of transactions. There are two parts to the information contained in a block.
The first part consists of the header elements that provide information about location and data pertaining to transactions contained within a block. For example, a hash within the header points to the previous block. There are no hashes for genesis blocks because these blocks have no predecessor. A merkle tree which is a data structure used in computer science to record transactions, is used to display the sequence of transactions contained within the block. Another hash within the block contains timestamp information (which displays the time and date of the block’s creation), nonce (which is the number that is required to be solved by miners), and difficulty level (which denotes the difficulty of the problem being solved). The second part is the identifier information. Again, this is a cryptographic hash function. It is generated by hashing the header elements twice in a row.
One of the alleged benefits, or risks, of bitcoin is its unique anonymity. Those transacting in bitcoins are supposed to be tied to a specific bitcoin address rather than a personal name or email. Yet, anonymity is somewhat compromised because of the blockchain information ledger. Since every transaction is publicly logged, one single breach of ownership identity could lead to the revelation of many other owners by simply following the transactions. The blockchain is still more anonymous than a bank statement, but it is not an impenetrable veil of secrecy as some assert. Even the name, or pseudonym, of the bitcoin founder is known.
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