Page 11 - My FlipBook

ball of yarn, and the result is continuous. Each stitch depends on the one
just before it. It’s impossible to remove part of the fabric, or to substitute
a swatch, without leaving some trace: a few telling knots, or a change
in the knit. In a blockchain system, too, every line is contingent on what
came before it. Any breach of the weave leaves a trace, and trying to
cover your tracks leaves a trace too.”

THE BITCOIN BLOCKCHAIN
Bitcoin is the most well-known and successful application of blockchain.
Studying Bitcoin leads to a better understanding of how blockchain works
in the real world.
Bitcoin accounts are called addresses. They are random strings of
letters and numbers. Nothing else is associated with them—no names,
no social security numbers, and no business or residential addresses
that would identify the owner. Each Bitcoin address has a secret code,
or a private key, that allows someone to access it. The owner of the
secret code holds the Bitcoin. If the secret code is stolen, forgotten, or
otherwise lost, the Bitcoin cannot be used.
The holder transfers the Bitcoin to another person by using their
private key. The transaction actually becomes part of the Bitcoin code and
is transparent, meaning anyone with access to a computer or smartphone
can see which addresses have owned the Bitcoin and which address
owns it currently.
Nakamoto created incentives for third parties to verify Bitcoin
transactions. The verification involves solving a complicated math
problem—or proof of work—that requires significant computing power
and energy. The third parties, called miners, are compensated for their
work by being paid a fraction of the transaction in Bitcoin. They also
receive a block reward, or a certain quantity of newly generated Bitcoin.
The miners race to validate the transactions, and the reward goes to the
miner who completes the proof of work the fastest and most thoroughly.

15 BITCOIN ANd BLOCKCHAIN