Blockchain Basics – Blockchain Structure by University at Buffalo #3

Blockchain Basics – Blockchain Structure by University at Buffalo #3

Here is the basic structure of a blockchain. Transaction is the basic element of the Bitcoin Blockchain. Transactions are validated and broadcast. Many transactions form a block. Many box form a chain through a digital data link. Blocks go through a consensus process, to select the next block that will be added to the chain. Chosen block is verified, and added to the current chain. Validation and consensus process are carried out by special peer nodes called miners. These are powerful computers executing software defined by the blockchain protocol. Let’s now discuss the details of a single transaction in bitcoin. A fundamental concept of a bitcoin network is an Unspent Transaction Output, also known as UTXO. The set of all UTXOs in a bitcoin network collectively defined the state of the Bitcoin Blockchain. UTXO’s are referenced as inputs in a transaction. UTXO’s those are also outputs generated by a transaction. All of that UTXO’s is in a system, are stored by the participant nodes in a database. Now let’s review the role of the UTXO’s in a Bitcoin Blockchain. The transaction uses the amount specified by one or more UTXOs and transmits it to one or more newly created output UTXOs, according to the request initiated by the sender. The structure of a given UTXO is very simple. It includes a unique identifier of the transaction that created this UTXO, an index or the position of the UTXO in the transaction output list, a value or the amount it is good for. And an optional script, the condition under which the output can be spent. The transaction itself includes a reference number of the current transaction, references to one no more input UTXOs, references to one or more output UTXOs newly generated by the current transaction, and the total input amount and output amount. Participants can validate the transaction contents. Does the UTXO’s reference input exist in the network state? This is the only one of the many validation criteria. Recall our demonstrated scenario. This is similar to Amy asking Kevin to verify the money in the envelope to be $10,000. Are these UTXOs valid? All right. It is time to explore the real transaction. It is available at this link. At the top left is the transaction number. Just below, there are three input UTXOs referenced. And an arrow points to the references of the two output UTXOs. Note that there are three input UTXOs and only two output UTXOs. This means that the total amount in three input UTXOs are spent to generate two new output UTXOs. Just below the output UTXOs is a total amount transferred in the Bitcoin value. And that is shown in green. Let’s now move on to learn about a block. As you can see, a block is composed of a header of information about the block, and a set of valid transaction. At first, we’ll examined the genesis block. It’s available at this link. We introduce this block number zero for posterity’s sake. This is where it all began. Satoshi Nakamoto initiated the Bitcoin Blockchain with one transaction of 50 Bitcoins or 50 BTC. This one transaction created a UTXO output for half in his address. The data the Blockchain creation is January third, 2009. There was no previous block. This field is all zeros. It also list a block reward or minus fees of 50 BTC. We’ll discuss minus reward in our later lessons. Let’s now look at the more recent block 482808. On the right panel, note the current block hash. The previous block hash that there’s a link to the previous block. And on the left panel down here, the Nonce. You will learn about the block hash computation in the module quiz and in the later lessons. Now, let’s look at the structure of the Blockchain by peeking into the Bitcoin Blockchain. Our goal is to understand the link between the blocks. Let’s consider the chain of three blocks: 488867, 488868. 488869. 488868 shown in the middle, has the hash of 488867 as its previous hash. Block 488869 has the hash of 488868 as its previous hash, forming the links in the chain. To summarize, transaction bring about transfer of value in the Bitcoin Blockchain. The concept of UTXO defines the inputs and outputs of such a transaction. Once a block is verified an algorithmic-ally agreed upon by the miners, it is added to the chain of blocks, namely the Blockchain.

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