Blockchain exchange and transfer occur by means of a shared distributed ledger, which records all the details of every transaction that occurred among the network participants without involving any trusted centralized party for blockchain development. Each copy of the ledger occupies in synchronization with all the involved parties, thus reducing the risk of a single point of failure.

What is the Blockchain and Why is it So Important?

Bitcoin works on Public Key Infrastructure (PKI) in the blockchain for authenticating users and controlling all the access. For source authentication and identification, each transaction is digitally signed by the owner with a separate key.

To keep a track of all transactions occurring simultaneously, multiple transactions are grouped together in a structure called ‘block’ uniquely identified by its separate hash and timestamps. Validation of each transaction and the block, among potentially distrusted users, is done using an agreement mechanism, which means the state of the shared ledger is updated by the accord of the majority of nodes.

This updating in the case of bitcoin employs the proof-of-work consensus algorithm, whereby miners attempt to find a special value to achieve the block’s hash, less than a target value, which is usually set to avoid any dispute and establish trust.

This target value is set in such a way that miners compete to find a nonce in around 10 minutes, hence the block generation time is 10 minutes.

This process by which nodes perform accurate computations, thus giving their resources to find the nonce is called mining and the nodes doing so are called miners. Through this mining, nodes compute the proof-of-work which is a form of achieving agreement among the distrusted modes.