Homework 7

h7 Final Countdown

Task a: Find a block and a transaction in BitCoin public ledger and explain its key parts.

 

I tried to find information about Bitcoin blocks using Google search engine and the phrase “bitcoin block explorer”. Google gave me a link to the Blockchain.com web resource, where I can get up-to-date information about blocks and transactions. Blockchain.com publishes information about new blocks, the number of block confirmations, transactions in them, as well as transaction sizes and rewards for block creation.  As you can see in the picture, the intervals for creating blocks are not the same. Sometimes new blocks are created a few minutes after the previous one, sometimes it may take longer. There is also information about the block number and its creator, if the name is known, these are usually large pools of miners.

I opened one of the blocks, I saw information about the time of block creation, who created the block and how many confirmations of its creation. It shows how much remuneration was paid to the creator, which, consists of a reward for creating a block and a commission fee. There is also information about the number of transactions in the block, their total amount in bitcoins and in US dollars.

Below is the information about the block and Hash of the block as a confirmation of the performed calculations, which starts with a certain number of zeros. There is also a Nonce number, so that everyone can make sure that the Hash calculations are carried out correctly, as well as a Merkle root Hash that indicates the initial block in the blockchain chain, with which the validity of the block can be checked.

There is also the complexity of calculations, which varies depending on the current capacity of all mining resources, so that the block is found on average once every 10 minutes.

The transactions included in the block are listed below, there are 1021 of them in this block. Each transaction has a Hash. Using the Hashes of all transactions, previous block Hash and the Nonce number, the Hash of the new block is calculated.

In the first place is the transaction to the creator of the block, which consists of a reward for creating a block and a commission fee. As we can see, in the first transaction of the block there is no wallet from which Bitcoins were transferred. Instead, it says “COINBASE (NewlyGenerated Coins)”, which means these are newly created Bitcoins.

In the second transaction, we see that bitcoins from eight addresses were transferred to two addresses. As you know, Bitcoins cannot simply be merged, for this you need to create new Bitcoins. It seems to me that in this case, the coins received from several previous transactions merge together.

By clicking on one of the addresses, I got to the page of this address, where you can see the number of transactions made using this address, their amount, the balance of coins on the address. This is a fairly large investor or trader, since the sum of all transactions in terms of US dollars is more than 3 trillion, and the current balance is $82,849,931.77. It is quite unusual in a world where banking secrecy exists to see the balance on the account of other persons or organizations. However, it should be noted that the Bitcoin address is anonymous, unless the owner has published it. The user can make as many addresses as he wants.

Below are the latest transactions of this address. As we can see, one transaction is not confirmed, and the second is confirmed only twice. The more confirmations of the transaction by other nodes of the Bitcoin network, the more reliable the transaction is.

By opening one transaction, you can see that the transfer was made from two addresses, some of the coins went to one address, and the other returned to one of the sender’s addresses as change. Thus, I can assume that both addresses from which the transaction was made belong to the same user.

In conclusion, I would like to note that it was quite interesting to watch real transactions and blocks. Before starting this course at university, I had no idea how Bitcoin works. Now I’m pretty well versed in the concepts of cryptocurrencies and this is all thanks to the materials I studied under the clear guidance of our teacher Tero Karvinen

 

Sources:

Wikipedia. Merkle tree

Investopedia. Merkle Root (Cryptocurrency)

Blockchain.com. Explorer

Felten et al 2015: Bitcoin and Cryptocurrency Technologies