Step-by-Step Summary of the Bitcoin Network
Step 1: Creation of Transactions
- Anyone who wants to receive services from a third party creates a transaction.
Step 2: Broadcasting Transactions
- All transactions are broadcasted on the network to all nodes.
Step 3: Assembling Transactions into a Block
- Each node collects new transactions into a block.
- The sender offers a certain amount of bitcoins to the miner as an incentive.
Step 4: Finding Proof-of-Work
- The node works on finding the proof-of-work for the assembled block.
Step 5: Broadcasting the Assembled Block
- When the node finds the proof-of-work, it broadcasts the block on the network.
Step 6: Verifying Transactions
- The nodes that receive the new block verify that all transactions in the block are valid.
Step 7: Re-Assembling Transactions
- If the block is accepted as valid, the node will re-assemble the transactions in its block and work on finding the proof-of-work for the newly created block.
Step 8: Growing the Blockchain
- The blockchain continues growing forever as new blocks are added to it.