Bitcoin Blockchain

The Bitcoin Blockchain is the public, append-only record of every Bitcoin transaction since January 2009, and the network of computers that keeps it. It is a permissionless blockchain: anyone can run the software, check the full history and propose new blocks, and no company or government controls who takes part. Its only job is to record who owns which coins and to stop the same coin being spent twice.

The blockchain is the infrastructure, and the asset it tracks is Bitcoin (BTC). It was the first working blockchain and the model for most that followed, although later networks such as the Ethereum Blockchain added general-purpose programming that Bitcoin deliberately keeps limited.

Think of the blockchain as a book of receipts that can only ever grow. Every ten minutes or so a new page is added, listing the payments made since the last page. Each page is stamped with a fingerprint of the page before it, so tearing out or editing an old page would spoil every stamp after it, and everyone would notice at once.

Who gets to write the next page is settled by a race. Computers around the world guess numbers billions of times a second; the first to hit a winning number earns the right to add the page and collects a reward. Guessing is expensive because it burns electricity, which is exactly what makes cheating costly: to rewrite history, a cheater would have to out-guess the rest of the world, page after page.

The design was set out in Satoshi Nakamoto's 2008 white paper and went live with the first ("genesis") block on 3 January 2009. Nakamoto stepped away in 2010 and 2011, and development passed to volunteer contributors of the open-source Bitcoin Core software. Changes are proposed through Bitcoin Improvement Proposals and only take effect when node operators choose to run them, which makes upgrades slow and contested. A long dispute over block size ended in August 2017, when the Segregated Witness (SegWit) upgrade activated and a group that wanted larger blocks left to create Bitcoin Cash through a fork. The Taproot upgrade followed in November 2021, improving privacy and making complex spending conditions cheaper.

Bitcoin records coins as unspent transaction outputs (UTXOs) rather than as account balances. Each transaction spends earlier outputs and creates new ones, locked to a public key so that only the holder of the matching private key can spend them. Transactions are grouped into blocks, and each block contains the hash of the one before it, so changing any old transaction would break every block that follows.

• Blocks. A new block is added about every ten minutes, each limited to 4 million weight units since SegWit.
• Nodes. Thousands of independent nodes store the chain and reject any block that breaks the rules.
• Scripts. A simple scripting language allows multi-signature wallets, time locks and other conditions, but not full smart contracts.

Agreement on the chain comes from proof of work, a form of consensus. Miners repeatedly run the SHA-256 hash function until they find a block whose hash falls below a target. Every 2,016 blocks, about two weeks, the network resets the difficulty so blocks keep arriving every ten minutes on average:

• $D_{\text{new}}$ and $D_{\text{old}}$ are the new and old mining difficulty.
• $T$ is the time the last 2,016 blocks actually took, in minutes.
• 20,160 minutes is the target time for 2,016 blocks at ten minutes each.

If the last 2,016 blocks took 18,144 minutes because more miners joined, the difficulty rises by a factor of $20{,}160 \div 18{,}144 \approx 1.11$, about 11 percent. Each adjustment is capped at a factor of four in either direction. Nodes follow the valid chain with the most accumulated work, so rewriting history would need more computing power than the rest of the network combined, the so-called 51 percent attack. Merchants commonly wait for six confirmations, about an hour, before treating a large payment as final. Every block also pays its miner the transaction fees inside it, and as the new-coin reward keeps halving, those fees are expected to become the main reason miners keep securing the chain.

The base chain, often called layer 1, handles only a handful of transactions per second, so fees rise when demand is high. Most efforts to scale work above it. The Lightning Network lets users open payment channels and settle many payments off-chain, which suits microtransactions. Sidechains and other layer 2 designs are also used. Since 2023, "Ordinals" inscriptions have used block space for digital artefacts, which raised fees and divided the community.

The main criticism is energy use: proof-of-work mining consumes electricity on the scale of a mid-sized country, though a growing share comes from surplus or renewable power. Others point to limited throughput, the concentration of mining in a few large pools, and the fact that the public ledger is pseudonymous rather than private, which makes it open to blockchain analytics.

• Bitcoin Core
• Bitcoin Improvement Proposals (BIPs)
• Faisal Khan: Lightning Network vs Bitcoin Network Transaction Speed