Overview of bitcoin architecture

After you read all my articles related to bitcoin, you should have a basic understanding of how bitcoin works. If not, let us do a revision together!

Bitcoin is a decentralized digital currency without the control of central banks. Its total monetary supply is fixed at 21 million to prevent inflation. (For more details -> What is bitcoin?) It consists of four main components, i.e. digital signature, blockchain, distributed network and mining.

Firstly, a digital signature is generated by the private key to ensure only the owner of the respective bitcoin address can spend the fund. Since digital signature is a sub-category of cryptography, bitcoin is also regarded as a cryptocurrency. (For more details -> Cryptography and bitcoin)

Secondly, blockchain is an immutable database storing all bitcoin transaction records in chronological order. The inclusion of a cryptographic function called hash in each block makes it difficult for attackers to alter the records. Account balances of all users can be calculated from the blockchain records. (For more details -> What is blockchain?)

Thirdly, a distributed network further enhances the immutability and ensures the reliability of the blockchain. Since everyone can be a node to store the same copy of blockchain, it is extremely difficult for malicious actors to modify the records stored in all nodes. Multiple copies of blockchain stored separately around the world can avoid a single point of failure. (For more details -> Can Satoshi spend more bitcoin than he actually has?)

Lastly, mining is a consensus mechanism to determine which transactions can be included in the blockchain. A block is created every 10 minutes by solving a difficult mathematical equation. Miners can obtain newly generated bitcoin in compensation for contributing the computing power. (For more details -> What is bitcoin mining?)

To conclude, please check the diagram below.