The peer-to-peer (P2P) Bitcoin network is the decentralized infrastructure through which Bitcoin transactions are conducted. Here’s how it works:
Decentralization: Unlike traditional financial systems, there’s no central authority overseeing Bitcoin transactions. Instead, transactions are verified and recorded on a distributed public ledger called the blockchain.
Nodes: Participants in the Bitcoin network run specialized software called nodes. These nodes maintain a copy of the entire blockchain and communicate with each other to validate transactions and blocks.
Miners: Miners are specialized nodes that compete to validate transactions and add them to the blockchain. They do this by solving complex mathematical puzzles through a process called proof-of-work (PoW). This process secures the network and ensures the integrity of transactions.
Transactions: When someone wants to send Bitcoin to another person, they broadcast their transaction to the network. Nodes verify the transaction’s validity and relay it to other nodes. Miners then include these transactions in blocks, which are added to the blockchain after being validated.
Consensus: Consensus is reached through the longest chain rule, where the chain with the most cumulative computational work (the longest valid chain) is considered the authoritative version of the blockchain.
Incentives: Miners are rewarded with newly created bitcoins and transaction fees for their efforts in securing the network and adding new blocks to the blockchain. This incentivizes them to participate honestly and maintain the integrity of the system.
Wallets: Users interact with the Bitcoin network through software wallets, which allow them to generate addresses for sending and receiving Bitcoin. These wallets also store the private keys needed to access and manage their Bitcoin holdings.
Overall, the P2P nature of the Bitcoin network ensures that it operates without a central authority, making it censorship-resistant and highly resilient to tampering or control.
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