With all the hype surrounding bitcoin, it’s important to have an understanding of what happens behind the scenes and to do a comprehensive BitCoin Code review of the blockchain.
The blockchain is a very large shared list of addresses with their bitcoin balances. Not only is it very large but it is also shared. Every new block on the blockchain represents an update to the list showing how the account balances stand after mining has occurred or after a transaction has occurred where there has been the exchange of bitcoins. Whenever a transaction is submitted to the network, the information is passed on to all the nodes in the network simultaneously throughout the network.
The blockchain is designed to make one thing extremely difficult, and that is the crux of its security: double spending. While there have been a few breaches in the infancy of bitcoin, they do not occur anymore and hacking into this system to make double spending possible would be extremely difficult. That is why the blockchain acts as a kind of public ledger of economic transactions.
What Is Recorded in Each Block?
The blockchain is so called because it is a chain of blocks. The blocks are ordered chronologically, and each block contains two important components.
The very first component is the header element that gives information about the location and pertinent data of the transactions contained within that block. Each block contains a hash that points to the preceding block, for example. The genesis block has no hash because it was the very first block and had no predecessor.
The sequences of transactions inside the block are displayed using a special data structure in computer science known as a Merkle tree. There is also another hash contained within the block that displays the timestamp of the block. Each block also contains a nonce, which is the number of miners needed to solve, and a difficulty level.
The second part of the block contains the identifier information and is a security measure. It is another cryptographic hash function and is creating by hashing the elements contained in the header twice over.
The Principle of Anonymity
Perhaps one of the most alluring benefits of bitcoin and the blockchain network is the anonymity it offers. When you deal with a currency or network that is centralized, thereby relying on some kind of authority to verify and secure transactions, then you can never really be anonymous. Sure, the authority may claim that your information is safe with them and that they maintain the highest standards of confidentiality. However, of that authority is the government, then you can never trust them because they can always reveal your identity for a variety of reasons, such as when you’re under investigation. If that authority is some kind of institution, then they can potentially be hacked, and the information they hold can be stolen, which means you can still never trust them.
With bitcoin, your transactions are tied to an address on the blockchain network, rather than a name, phone number or email address. Every transaction is public; therefore, any breach of identity could potentially reveal everyone else’s identity. However, it is still far more anonymous than any other financial system.