I have been interested in cryptocurrencies for a while and just accepted that they run on blockchain and are decentralized.
Now, being a bit nerdy and bored, I really want to understand how the Bitcoin blockchain works. I think I get how Proof of Work (PoW) functions and how blocks are connected to prevent changes to past blocks.
But there are two things I don’t understand:
Who checks if a transaction is valid? Is it the miner? How and when is it checked—before or after mining the block?
I have read that the double-spending problem is solved by using the longest chain, so the same transaction in two blocks won’t work. But couldn’t two transactions be included in one block, causing double spending?
That is fantastic that you are looking into how the Bitcoin blockchain works! Here’s the breakdown:
Validating Transactions: Miners ensure transaction validity when they add them to a block, while nodes autonomously verify transactions according to Bitcoin’s rules.
Double-Spending: Within a block, transactions are scrutinized to prevent spending the same funds twice. If conflicting transactions appear in separate blocks, the network resolves this by adopting the longest valid chain and discarding shorter chains with conflicting transactions.
Keep exploring—knowing these methods is critical to understanding how Bitcoin works securely and reliably!
Nodes verify and check the transaction, broadcast it to more nodes for validation, and then wait in the memory pool for a miner to include it in a block.
Contrary to popular belief, miners have no unique role in the network’s or transactions’ verification; instead, they only play the lottery by repeatedly entering numbers in the hopes of winning a reward.
Here’s how the validation of a cryptocurrency transaction works: When I initiate a transaction, it gets broadcast to the peer-to-peer network of nodes running the blockchain software. These nodes compete to validate the transaction by solving complex cryptographic puzzles. The first node to solve the puzzle and create a new block containing my transaction gets to add it to the blockchain. To validate the transaction, nodes check that I have enough funds in my wallet and that the transaction hasn’t been double-spent. Once a majority of nodes have validated the block containing my transaction, it becomes immutable and irreversible. The entire process usually takes 10-60 minutes depending on the blockchain. Validation is critical to prevent fraud and ensure the integrity of the decentralized ledger. The mining nodes are incentivized to validate transactions through block rewards paid in the cryptocurrency.