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Understanding The Bitcoin Blockchain

By (Rain İçerik Ekibi - Jun 05, 7:00 PM

The term “blockchain technology” has become one of the most searched queries on the internet, reflecting its growing popularity. With businesses, enterprises, and even governments adopting blockchain, learning about it has never been more important and valuable. 

This guide will touch on the Bitcoin blockchain, understand its underlying technology, and how it functions. 

What Is Blockchain Technology? 

Most cryptocurrencies, including Bitcoin, are powered by blockchain technology. The blockchain has a series of individual blocks arranged in chronological order based on the order of transactions. The blocks consist of a record of each time someone sent or received BTC on the Bitcoin network. 

Immutability and decentralization are the two key properties of the blockchain.

  1. The blockchain is immutable, meaning that any transaction recorded on the blockchain cannot be tampered with. 

  2. Decentralization means that there is no central body storing all the information within the network. Blockchains can store different types of information, but the Bitcoin blockchain is specifically used as a ledger for transactions. 

Types Of Blockchains 

Before we move ahead, let’s understand the two main types of blockchains – private and public.

  • Public blockchains - Public blockchains are open and decentralized networks accessible to users who want to request or validate transactions. Miners that validate transactions receive a reward for their effort and resources. Public blockchains use the Proof-of-Work consensus mechanism (more on that later). Bitcoin is the best example of a public blockchain. 

  • Private blockchains - Private blockchains have access restrictions and are open to only a select group of individuals. Any individual wishing to join a private blockchain requires permission from the system administrator.. 

What Are Consensus Mechanisms? 

Consensus Mechanisms are fault-tolerant mechanisms used in blockchain systems, helping them achieve the necessary agreement on data values or a state of the network among multi-agent systems (cryptocurrencies). When it comes to cryptocurrencies, while there are several consensus mechanisms, Proof-of-Work and Proof-of-Stake are the most popular ones.


Proof-of-Work is the original consensus mechanism and is still used by Bitcoin. The mechanism requires participating nodes to prove that their work qualifies them to receive further rights to add new transactions to the blockchain. Proof-of-Work has been highly criticized because it is extremely energy-intensive and capable of processing only a small number of transactions. However, PoW offers a high degree of security and finality. 


Proof-of-Stake differs from Proof-of-Work, with transactions being validated by a chosen validator. The validator is chosen based on the number of coins they hold (stake). The stake is directly proportional to an individual’s mining power, so the bigger their stake, the more mining power they control and the higher their chances of being selected as a validator for the next block. 

Bitcoin uses the PoW algorithm to maintain consensus.

Understanding The Bitcoin Blockchain 

Blocks are data structures that exist within the Bitcoin blockchain. The block records transactions that the network has not validated. Once the data is validated, the block is closed, and a new block is created. 

Each block consists of specific information, with many pieces of information contained in each block. Blocks generally consist of the following information.

  • Magic number - The magic number consists of specific values used to identify the block as part of the cryptocurrencies (in this case, Bitcoin) network.

  • Block size - The block size sets the size limit on each block so that each block can consist of only a specific amount of information. 

  • Block Header - The block header contains information about the block. 

  • Transaction counter - The transaction counter indicates the number of transactions stored in the block. 

  • Transactions - This is a list of all transactions within a block. 

Within a block, the transaction element is the largest, containing most of the information. This is followed by the block header, which consists of the following, 

  • Previous block hash - This is the hash of the previous block’s header. 

  • Hash Merkle Root - This is a hash of all transactions in the Merkle tree of the current block. 

  • Time - A timestamp that indicates where to place the block in the blockchain. 

  • Bits - This is the difficulty rating of the target hash, representing the difficulty involved in solving the nonce. 

  • Nonce - The nonce is the encrypted number that a miner must solve to verify and close the block. 

In Closing

This was just a brief guide designed to introduce you to the Bitcoin blockchain, its constituents, and how it functions and get you up to speed with the basic principles of blockchain technology. If you wish to purchase Bitcoin, you can easily do so through Rain, an entirely secure trading platform regulated by the Central Bank of Bahrain (CBB). You can set up your account here and get started. 


Rain is a Crypto-Asset Services Provider headquartered in İstanbul. Rain provides services to its users at financial institution standards.





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