Date: Friday, 17th January
Project: Block Digest
Beginners Guide Part 6 - How Bitcoin Works with Shinobi:
As a newcomer to Bitcoin, you can begin using the network without understanding the protocol. While in the early days Bitcoin required a level of technical knowledge, there is now a plethora of companies creating products which abstract this away.
As Bitcoin is such a unique form of money, you should invest time in understanding some of the more complicated aspects such as how the protocol works. While there are good wallets which will take care of validating transactions for you, by operating a node, you can become fully self-sovereign by validating your transactions.
The Bitcoin protocol is complicated, so in this episode, we give you an introduction and overview of how it works:
Supply - Bitcoin has a fixed supply of 21 million coins and a fixed supply issuance. Starting at 50BTC per block this reward is cut in half every 210,000 blocks (or ~every four years).
UTXOs - an Unspent Transaction Output which is used as an input for a new transaction.
Open-source - openly available source code that anyone can access allowing anyone to review and contribute to the code.
Consensus rules - the rules that full nodes must follow to be in agreement with all other nodes on the state of the blockchain
Full Node - a program that verifies and validates all transactions and blocks for the entire history of the Bitcoin blockchain
Mining - the process of adding transactions to the Bitcoin ledger and securing the network. Miners create blocks by spending energy in what is known as proof of work.
The difficulty adjustment - this alters every 2016 blocks (~2 weeks) based on the time it took to mine the previous 2016 blocks, which is how the network can maintain a ~10 minute block time.
In Part 6 of the Bitcoin Beginner’s Guide, I am joined by Shinobi, host of Block Digest. In this episode, we are looking at how the Bitcoin protocol works. We discuss the supply & halvings, transactions & UTXOs, consensus rules, mining and nodes.