2.5 Understanding Bitcoin - Video Tutorials & Practice Problems

So now that we have been talking about Bitcoin, you've understood the double spend problem. Let's dive even further into Bitcoin to understand exactly how it works. So, the way that Bitcoin works is a peer to peer transfer, and it's done directly over the web, leveraging the Bitcoin network which is a decentralized network of computers and using this technology called Blockchain. This is a Network of Nodes. Any device that's connected onto the Bitcoin network is considered a Bitcoin node. So there's this network of nodes all over the world. It is also a public blockchain, that is anybody can get onto the Bitcoin network and actually have a note of their own. So what that means is that there is no centralized institution that could actually say, you can have a node or someone else can't have a node. It's a public blockchain. Furthermore, as a public blockchain, every single record that's recorded on the Bitcoin blockchain is public for anyone to see. So, as these transfers happen, there's a group of nodes which are known as Miners. Now, the miners are a key part of what makes the Bitcoin blockchain and Bitcoin network work. Now, let me talk to you a little bit about these miners. Anybody can be a miner. What that means is that if you personally wanted to be a miner, you could just download the software and you can start mining on the Bitcoin network. Now, interesting thing about being a miner is that the role of the miners is to process and confirm transactions. That is, this Bitcoin network is built with the purpose of processing and confirming the transactions that take place on the Bitcoin network. Additionally, this network of miners secures the network and the way that they do that is using very advanced hash cryptography. And we'll be talking about this cryptography element as we continue with this course. Now, what the miners really do is solving cryptography challenges. And we'll go exactly through a demo. That's gonna show you exactly how to solve these cryptography challenges, but there are billions and billions of attempts at solving these cryptography challenges. And it requires very powerful computers. As a result, this network of Bitcoin miners is an extremely powerful network of computers, all working together to secure the network. And for this work that these miners are performing, the miners are paid in Bitcoin. That is, these miners actually get compensated, but they don't get compensated in dollars. They get compensated in Bitcoin. And in many ways, this is one of the key reasons why Bitcoin is so valuable and so secure because the miners that are actually securing and processing all these transactions and securing the network they get paid in Bitcoin. And it is in their best interest that the Bitcoin network doesn't get hacked, because as a result, if the network got hacked and the Bitcoins were actually in some way compromised, the value of Bitcoin would plummet. So, this whole attempt of having the miners be compensated in Bitcoin in many ways adds to the value of Bitcoin and helps secure the network.