Amidst all the hype surrounding blockchain and cryptocurrency, it is worth stepping back to understand how cryptocurrency technology broke through to the mainstream. While the community has been developing digital currency systems since the 1980s, Bitcoin was the first to see widespread use. Bitcoin has two crucial properties that set it apart from prior proposals. First, Bitcoin is decentralized; instead of passing transactions through a central bank, Bitcoin uses a decentralized network of miners and a distributed consensus algorithm to agree on a single public ledger of transactions called the blockchain. The blockchain is just a list of blocks, each of which contains a set of confirmed transactions. Second, Bitcoin has baked-in incentives: miners compete to add a block to the blockchain by solving a computational puzzle, and the winning miner claims several bitcoins as a mining reward. This incentive structure has given rise to a thriving industry of bitcoin miners.
When the Bitcoin protocol was first announced, the community assumed that each time a miner successfully solved a computational puzzle, she would immediately announce her solution to the network. After all, if our miner delayed announcing her solution to the network, some other miner might find his own solution and preemptively claim the mining reward. As such, the 2009 Bitcoin white paper makes an implicit assumption of perfect information—that all miners have the same view of the blockchain, and each time a miner solves a puzzle, the puzzle solution and corresponding block is immediately known to all other miners.
No entries found