Bitcoin blockchain is the oldest implemented use of blockchain technology. It has revolutionized how we deal with money in a digitized, decentralized world.
Bitcoin blockchain history goes back to the 90’s
Blockchain was invented by the mysterious Satoshi Nakamoto. We say mysterious as it is unknown who this person is. It might even be a group of people. It was first created in 2008, and its purpose was to serve as a public transaction ledger for Bitcoin. But we need to go back a bit further in time to see how Satoshi could’ve created the Bitcoin blockchain.
Stuart Haber and W. Scott Stornetta wrote about how to time-stamp a digital document, back in 1991. The publication was about adding a time-stamp to a document that could not be tampered with. They suggested to ‘include bits from the previous sequence of client requests in the signed certificate, to know that the time-stamp occurred after these requests.’ In 1993, Haber and Scott Stornetta wrote another paper together with Dave Bayer, called Improving the Efficiency and Reliability of Digital Time-Stamping. In this publication, a Merkle tree was added to their chain. This Merkle tree is a system in which every leaf node of the tree contains the hash of a data block. Each leaf also has the hash of the child nodes. With the inclusion of the Merkle tree to their chain of blocks, Haber, Stornetta, and Bayer, made it possible for more documents to be stored on a single block. The chain of blocks became a lot more efficient.
Satoshi Nakamoto was the first to make any practical use by creating the Bitcoin blockchain. It was used to record transactions made in Bitcoin. This blockchain was shared on many computers, all connected to the network. This way the Bitcoin blockchain could not be changed by anyone without altering all subsequent blocks. If a change had been made, the block would lose the consensus of the network. By adding transactions to the blockchain and using it as a public digital ledger, a new decentralized financial system was created.
Bitcoin blockchain structure
The Bitcoin blockchain is a secure method of transferring money from one user to another without the use of a financial institution such as a bank. It is a transparent way of making transactions as everyone involved can see and verify the validity of any transaction. Each and every time a user sends money to another person, this is added to one of the many blocks and added to the Bitcoin blockchain. If needed, they are still all visible, the blockchain keeps growing. In fact, the Bitcoin blockchain is already rather large. In September 2018, the Bitcoin blockchain was 184 Gigabyte. This just means that the cryptocurrency has been used a lot. In the beginning of 2012, the Bitcoin blockchain wasn’t even 1 Gigabyte.
Each block is set at a determined size of 1 Megabyte. Once the block is filled with transactions, it will be added to the public ledger. Blocks are mined. Mining for blocks is done by miners who run special software on their computers. Mining is really a computer working hard to solve difficult mathematical problems. The computer that solves the problem first, mines the block and gets rewarded Bitcoins for the services performed.
The limit of 1 Megabyte is causing some problems for the blockchain. Especially now that Bitcoin has gained so much popularity. The waiting time for Bitcoin transactions is around 15 minutes on average. In December 2017, when Bitcoin and cryptocurrencies were front-page news, the average confirmation time of Bitcoin transactions was 2,322 minutes.
There have been suggestions to raise the maximum size of the block to 2 Megabyte, or even larger. The community could not come to a consensus regarding this issue. This lead to a separation, called a fork. Some forks aren’t all too drastic and are called soft forks. But in some cases, groups of users decided to turn their back to the old Bitcoin and create their own blockchain. This split is called a hard fork. For more information about Bitcoin forks, check out this article.
One of the key selling points of the Bitcoin blockchain is that it is decentralized. The data is stored across the peer-to-peer network, which is considered a great safety feature. It is impossible to hack, as changing the data on a single block on a single computer would not cause any damage. As soon as that block is checked by the users on the network, they will all see that the block has been tampered with, and no transaction will be validated. Not even large banks or governments can influence what is happening on the Bitcoin blockchain. That is why it’s those institutions preaching caution when using blockchains, as they have no control over it.