Chapter

Building the Blockchain

From chapter 5 by Sambif

Concepts

1. How does the blockchain prevent double-spending?

   "Digital money is vulnerable to double-spending because a digital token can potentially be copied and sent to more than one person. Satoshi Nakamoto addressed this problem through a public blockchain

2. Why is a decentralized public ledger important?

   "Traditional monetary systems rely on centralized ledgers maintained by banks or central banks, which can provide efficiency and security but also give substantial power and profit to the record-keepe

3. How does the Yap ledger illustrate decentralized record-keeping?

   "The example of the Yapese fei stones shows how a community might replace a corrupt central record-keeper with a shared ledger maintained by every family. When a transfer occurred, it was announced pu

4. What role does the Internet play in decentralized money?

   "A decentralized ledger requires a way for many participants to communicate quickly and maintain a common record. The Internet supplies the network for near-instant, universal communication, while bit

5. What is recorded in the bitcoin blockchain?

   "The bitcoin blockchain is a chronological chain of blocks, with each block containing transactions that occurred around the same time. This sequence records the balances and identifying information a

6. Are bitcoins files or physical digital objects?

   "Bitcoins do not exist as self-contained files or documents that can be copied, stored, or lost. They exist as balances assigned by the blockchain to particular bitcoin addresses, and a wallet display

7. How do bitcoin addresses and private keys authorize payments?

   "Bitcoin addresses appear on the public blockchain as strings of letters and numbers, and other people can use them to send funds to the associated balance. To make a payment, wallet software uses a p

8. What work do bitcoin miners perform?

   "Bitcoin mining is primarily a form of distributed bookkeeping in which computers collect pending transactions and help package them into blocks. Mining also requires substantial computational effort

9. How do hashes package transactions into blocks?

   "A mining computer reduces transaction information to an encrypted alphanumeric string called a hash, using bitcoin’s SHA-256 algorithm to produce a fixed-length result. Even a tiny change in the unde

10. How does proof of work seal a new block?

    "After transactions have been packaged, miners compete to find a block hash that satisfies the conditions set by bitcoin’s algorithm. They repeatedly add a randomly generated number called a nonce to

11. Why does each block link to the previous block?

    "When a miner finds a valid block hash, the new block includes the hash of the preceding block and receives the next sequential block number. Because even a minor change to underlying data would alter

12. How do other miners confirm a winning block?

    "The miner that creates a block does not establish its legitimacy alone, because the other miners must verify both the proof of work and the transactions contained within the block. They compare the t

13. Why can a transaction take time to become fully confirmed?

    "A transaction may be accepted by merchants before final confirmation through payment processors that temporarily bear the risk of non-confirmation, but the underlying blockchain process requires mine

14. How does bitcoin keep block production on schedule?

    "Anyone can become a miner, so the network’s total computing power can increase as more participants join or acquire faster equipment. Bitcoin automatically measures the network’s combined hashing cap

15. How do mining rewards and transaction fees incentivize miners?

    "Miners initially receive newly issued bitcoins when they successfully seal a block, providing compensation for their equipment, electricity, and computational work. The issuance rate is reduced by ha