28. very differently (as we’ll see). However the Bitcoin ledger, the first Blockchain
ledger, requires three pieces of information to list a transaction:
1. An input: if John wants to send David a Bitcoin, he needs to tell
the network where he got that Bitcoin in the first place. Maybe
John received the Bitcoin yesterday from Sarah, so the first part of
the ledger entry says so.
2. An amount: this is how much John wants to send to David.
3. An output: this is David’s Bitcoin address and where the Bitcoin
should be deposited
Now comes the concept that’s difficult to grasp: there is no such thing as a
Bitcoin. Of course, there are no physical Bitcoins. You probably already knew
that. However, there are also no Bitcoins on a hard drive somewhere. You can’t
point to a physical object, digital file, or piece of code and say, “this is a
Bitcoin.” Instead, the entire Bitcoin network is only a series of transaction
records. Every transaction in the history of Bitcoin lives in the Bitcoin
Blockchain’s distributed ledger. If you want to prove that you have 20 Bitcoins,
the only way you can do it is by pointing to the transactions where you received
those 20 Bitcoins.
Almost all Blockchain have this characteristic in common. The transaction
history is the currency. There’s no difference between the two. Some new
cryptocurrencies are altering the way the ledger is written in order to provide
greater anonymity and privacy in transactions. They use certain identity masking
techniques to hide the sender and receiver of the transaction while still
maintaining a functional distributed ledger.
CREATING A BLOCK
The ledger is the core of the block, but it’s not the only thing that goes into a
newly created block. There is a header and a footer required for every block.
Additionally, the transactions included in the block are put through a process
that compresses, encodes, and standardizes them. When a verifier creates a new
block, it looks completely different from the ledger it was based off of.