There are six steps you need to actually ensure that you have a successful Blockchain. These are the following:
- New transactions are broadcast to the Bitcoin network (known as nodes in the paper).
- Each participant (each node) collects the new transaction in a block and in order, and then time stamps them (aka hash).
- Each node works on finding a difficult proof of work algorithm (think of it as a puzzle that the miners have to solve to prove they are a part of the system by solving this really difficult puzzle. Whoever solves it first wins). They win it for that block and that puzzle is based on verifying all the previous blocks. This ensures that it is all not re-written and that it is cryptographically secure.
- When the participant finds this proof-of-work it broadcasts the blocks to all the nodes. The first one who finds this proof wins the right to write that block to the permanent chain and gets paid. So why would you solve this problem? Why would you put in all this work to prove that my math is correct? Because you get paid which is really cool. That is why the Blockchain keeps growing and it is self-sustaining.
- The individual nodes except the block only if all the transactions are valid, and not already spent. This algorithm is called consensus and that is what prevents people from cheating.
- All the nodes or the participants in the Blockchain express their acceptance of the block by working on creating the next block in the chain. They are like “okay this computer over here won the algorithm, now I am going to go work on the next one because I want to win”, and that is how these blocks are added and added. It is automatic which also makes it cool.