Blockchains

Ownership on the Bitcoin blockchain is determined by a pair of cryptographic keys. The first, called the public key, resides in the blockchain for anyone to see. The second is called the private key, and its owner keeps it safe from view. The two keys have a special mathematical relationship that makes them useful for signing digital messages. Here’s how that happens: Helmut takes a message, combines it with his private key, does some calculations, and ends up with a long number. Anyone who has the original message and knows the corresponding public key can then do some calculations of their own to prove that the long number was in fact created with the private key.

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Any miner trying to add a new block must also provide a cryptographic proof to go along with it. In order to produce the proof, the miner digests the new block through multiple rounds of a hash function—a computation that takes a chunk of data of arbitrary length and reduces it to a meaningless alphanumeric string with a fixed length, called a hash. To make the process more challenging, the blockchain algorithm demands that the resulting hash start with a certain number of zeroes. The difficulty comes from the fact that there is no way to predict what hash any given data set will spit out, and so miners run the computation over and over on their validated blocks, each time inserting a random number into the data set. When that number is changed, a new hash results. When at last the miners get the correct number of zeroes, they’re done.

The first miner who finds a satisfactory hash then announces the new block to the other miners, who check it and append it to the full version of the blockchain that they are harboring on their computers. For performing all this work, miners collect a reward of newly minted bitcoins as well as any mining fees, which users voluntarily tack onto their transactions in hopes of pushing to the head of the line.

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When a new block is made, it contains the hash of the one before it. Any changes in old blocks will result in invalid hashes for all subsequent blocks. Therefore, it is impossible to insert bogus modifications into a previous block without having to repeat all the work that was performed after that block. In that lock analogy, it’s as though the design for the lock at the end of the chain depends on all the locks that came before it. So changing one lock in the middle of the blockchain means having to find new keys for every lock after it.