Blockchain is one of the first terms people encounter when learning about cryptocurrencies. A revolutionary technology set to change the digital world as we know it. But what is it? What does a Bitcoin block look like? This article will take the blockchain apart and explain the meaning of each element.
The concept of blockchain was first presented by Satoshi Nakamoto in Bitcoin’s original whitepaper. He called it a chain of blocks that provides the fundamental infrastructure for cryptocurrencies to operate on a peer-to-peer network. This is a good starting point when trying to fully understand the meaning of blockchain.
Each transaction recorded on the blockchain is stored in a block. Blocks are timestamped and linked to each other chronologically. They form a chain, hence the name blockchain. It is like a novel. Each transaction is a sentence, each block – a page, and the entire blockchain – a book.
What is a blockchain block?
A block, or data block, is the basic unit that makes up a blockchain. The exact format of the information contained within a data block may vary between different blockchains. However, the basic information it holds remains consistent for all cryptocurrencies.
A block has two parts: the block header and the block body.
- The block header consists of information that gives the block its identity. It includes the timestamp indicating when the block was created, information about the blockchain software, the hash of the previous block and the current block hash. There will be more about the block hash later.
- The block body contains transactions, the most important part of the block. The details and fees of all verified transactions are confirmed within the block body. When combined with the block header, a one-of-a-kind block is created. Or a unique page of our blockchain novel.
Block parameters: height, hash and size
Another term often used when talking about blockchain. If each data block is a page in a book, then the block height can be considered the page number. It is the position of a particular block within the blockchain. It is helpful when using blockchain navigation tools such as blockchain explorers.
The fun stuff! If you ever have a hard time grasping a blockchain-related term, that’s the one. We’ll try and keep it simple.
Going back to our blockchain novel example, if the block height is the page number, then the block hash is like the name of the page. Each transaction in the block shares a cryptographical relationship with its block hash.
If someone adds a transaction to the block, the block hash will also change. On a technical level, the block hash is the expression of the cryptographic hash function that maintains the security of the blockchain.
So, we have the pages (data blocks), sentences (transactions), page numbers (block height), and page names (block hash) of our blockchain novel. Is that everything? Of course not. When it comes to blockchain, people always have more questions to ask and new terminology to coin!
Another common term used in the blockchain. It is the answer to this question: how many sentences fit on a page? Or how many transactions fit within a block?
Every blockchain design provides for a maximum size of each block. This is referred to as the block size and varies from blockchain to blockchain. For example, Bitcoin’s maximum block size is 1MB, whereas Bitcoin Cash’s – 8MB. It doesn’t set the exact number of transactions for each block, as each transaction can contain different volumes of data and take up more or less space within the block. Still, it does indicate the capabilities and efficiency of the blockchain.
Block rewards for miners
Finally, we have the block reward. People get rewarded for validating transactions on the blockchain and creating new blocks. In the context of our blockchain novel, this can be thought of as the payment the author gets.
On the Proof of Work-based blockchains, such as Bitcoin, the miners are the authors and receive block rewards. The mechanism for distributing block rewards is hard-coded into the blockchain. Each added block will distribute rewards to the miners in the form of newly created coins and the total transaction fees of all transactions within the block.
Blockchain is a complex technology that takes time to understand. In our next blog post, we will examine it even further and discuss how exactly blockchain transactions work! If you want to learn more about cryptocurrencies and the world of digital finance, check out other interesting articles published on the MineBest blog.