Bitcoins are exchanged and transferred digitally through a computer generated code. To ensure that these Bitcoin transactions are completed safely and securely users use keys.
Two keys are always required for any Bitcoin transaction:
1. Public Key
This is the one that is used for the actual transfer of the Bitcoin. Because it is a public key, it allows anyone to verify the transaction. before a transfer can take place, the senders account is verified to ensure that they have sufficient Bitcoins in their account to cover the transaction. Upon completion of this first verification the transaction enters into the Block Chain. This is like a public ledger displayed in a transparent glass case; people can see but they can’t touch!
This first verification step prevents anyone from trying to send the same transaction to two different people at the same time. If anyone attempts this type of process it is referred to as double spending. Having the two different keys prevents this from happening.
2. Private Key
The end user then employs their private key to unlock the transaction, once it has been verified. The Bitcoin then gets deposited into their wallet. A wallet is simply a virtual bank account.
Because the system uses two keys all activity in the network can be easily traced. The process of verification often occurs multiple times before the receiver deposits the Bitcoin.
All of these transactions are available in the Block Chain, every transaction ever made is accounted for there. Plus anyone can view it if they wish to.
How the Blockchain is Created
As I described earlier, it takes several verifications for each transaction to proceed. At the present time the current number of verifications required is six.
Prior to a transaction entering the Blockchain, a new block must be formed. The first step in this process is to verify that the person sending the Bitcoin has the currency available in their wallet.
This is where it can get complicated!
To create a block, a process known as hash creation must occur. Imagine small nodes that are attached to a block each time it is verified. So the original block gets a little longer.
As this is all done via a mathematical software program, zeros are added at the beginning of the block. As each new block verification is completed, more zeros are added. The largest block is always taken to be the authenticated block.
Once this verification process has occurred six times this block enters into the BlockChain and a time stamp is associated with it. This is how you can easily see all the transactions that have ever occurred. No records are ever removed from the Blockchain and it will continue to grow in size.