What keeps the list in sync?

Please read before continuing: Technical Explanation of Bitcoin


It’s time to discuss the blockchain.

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How do we achieve order?

In our previous examples, we’ve only had five members in our network.. and I’m sure you could see how things could get messy. There are a lot of edits to keep track of.

Plus, bitcoin has many more participants than that. Imagine millions of people editing the list and sending their changes around to every single computer in the network. How would anyone agree on what version of the list is correct? We need a way to achieve consensus.

List -> Blockchain

To solve this dilemma, bitcoin uses something called a block. A block is just a collection of different edits to the list. A blockchain is just a group of blocks that are linked together. The very first edits to the bitcoin list were grouped together and placed in block #1. The next edits to the list were grouped and placed in block #2. I think you get the idea…

The blockchain is how all bitcoin participants agree on what the correct version of names and balances is. The valid list is the blockchain!

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Remember from our technical lesson, in order to spend your bitcoin you need to reference a time in the past it was sent to you. More specifically, you need to reference a previous time on the blockchain that it was sent to you.

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The blockchain is the ultimate authority on who owns what bitcoin at any given time. It also keeps people from spending their bitcoin twice. Since the blockchain is a record of every transaction that has ever taken place, you can look back to see if Bob has already referenced this specific transaction of “Charlie -> Bob 7 BTC”. If he has, the other computers in the network will not accept his proposed edit and it will not be added to a new block.

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Once Bob’s message is sent to the other computers in the network, the transaction to Dave will be grouped with other transactions and added to the newest block in the chain! Now the whole network can see that this payment was made because it was included in the blockchain.

The blockchain is just a record of every valid transaction that has ever taken place, and it is the ultimate authority when determining everyone’s bitcoin balance.

Want to know how blocks are created?

Hint, this is where “mining” comes into play.