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How Blockchain Supports Bitcoin

Introduction Bitcoin has exploded in popularity over the last decade, becoming the first widely adopted cryptocurrency. But what exactly enables Bitcoin to function as a decentralized digital currency? The answer lies in the blockchain technology that underpins Bitcoin. In this explainer article, we’ll look at…


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Bitcoin has exploded in popularity over the last decade, becoming the first widely adopted cryptocurrency. But what exactly enables Bitcoin to function as a decentralized digital currency? The answer lies in the blockchain technology that underpins Bitcoin. In this explainer article, we’ll look at how blockchain serves as the foundation for Bitcoin and powers its key attributes of decentralization, security, and transparency.

What is Blockchain?

At its core, blockchain is a distributed digital ledger that records transactions in a verifiable and permanent way. Here are some key characteristics of blockchain technology:

Decentralized – The ledger is distributed across a network of computers rather than being stored centrally. This avoids any single point of failure.

Secure – Cryptography like hashing and digital signatures is used to ensure the validity of transactions and prevent tampering.

Transparent – Anyone can view the ledger to see transactions occurring in real-time. This provides transparency.

How Blockchain Supports Bitcoin

Now let’s examine how blockchain enables Bitcoin to operate as a decentralized cryptocurrency:

Maintaining the Ledger

The Bitcoin blockchain maintains a record of all Bitcoin transactions that have ever occurred. This ledger is distributed across a global peer-to-peer network of computers. When someone uses Bitcoin to pay someone else, a record of that transaction is sent out to the network and added to the blockchain ledger after validation.

Verifying Transactions

When a new Bitcoin transaction occurs, networked computers known as “miners” utilize cryptography and computational power to verify the transaction is valid and not fraudulent. The miners add verified transactions in bundles called blocks to the blockchain ledger.

Enabling Decentralization

With no central server or authority, the distributed blockchain ledger allows Bitcoin to operate in a decentralized manner. This avoids any one entity controlling the currency. The miners help decentralize the network even further by independently verifying transactions.

Providing Transparency

The publicly visible shared ledger provides full transparency into Bitcoin transactions. Anyone can examine the blockchain to see transfers of bitcoin between addresses. This allows for public verifiability and further builds trust in the system.

Guaranteeing Security

Cryptography like hashing and digital signatures used in the blockchain provide security for Bitcoin transactions. Digital signatures ensure only the owner can transfer coins from their address. Hashing algorithms help guarantee the integrity of the blockchain by preventing tampering.

The Blockchain in Action

  • To see how this works, let’s quickly walk through an example Bitcoin transaction:
  • Adam wants to send 2 BTC to Sue. He creates a transaction request that transfers 2 BTC from his wallet address to Sue’s address.
  • Miners verify Adam’s transaction has valid digital signatures and sufficient funds.
  • Miners add Adam’s verified transaction to a new block in the blockchain.
  • Sue can now see the 2 BTC confirmed in her wallet, with the transaction recorded on the blockchain ledger!
  • Conclusion

In summary, blockchain technology enables Bitcoin to function as a decentralized digital currency by maintaining a secure distributed ledger, verifying transactions via mining, and providing transparency. The blockchain allows Bitcoin to operate without any central authority in a transparent yet secure manner. By leveraging cryptography and decentralization, blockchain provides the foundation for Bitcoin to disrupt traditional finance as the world’s first cryptocurrency.


Nakamoto, Satoshi. “Bitcoin: A Peer-to-Peer Electronic Cash System.”, 2008,

Antonopoulos, Andreas M. Mastering Bitcoin: Programming the Open Blockchain. 2nd ed., O’Reilly Media, 2017.

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