Basic Components of Bitcoin
In this section, we are going to learn about the four basic components of bitcoin. These four elements will help us to understand bitcoin blockchain in a more clear way.
Here, we are going to put up every object that we have learned previously in a single SCENE. As we know that a block is made up of hash and complex cryptography environment, but this is only the one side of the coin. The bitcoin blockchain is more Amazing than we thought.
The basic components of bitcoin are listed below:
First Component: Software
Bitcoin is basically a software at the core that defines what a bitcoin is, as well as how a bitcoin gets transferred. It identifies what are the rules of a valid bitcoin, who can be inside Bitcoin, who cannot be inside Bitcoin, what is valid, what is not, etc. Everything is based on software, which is the Bitcoin software. This software is always operated in 24*7.
Second component: Cryptography
The software, at its core, uses cryptography and Bitcoin is a cryptocurrency. Bitcoin uses cryptography to regulate the transfer of bitcoin between parties, as well as the creation of new units of bitcoin. Without cryptography, Bitcoin would simply not be possible. So, we've got that this software uses cryptography to control the transfer of bitcoin over the internet.
Cryptography is a mathematical approach which is solvable by computers and not by humans. So all the stuff that protects your data is served by the cryptography.
Third Component: Hardware
To run and solve cryptography, it needs HARDWARE. This hardware is composed of those thousands of miners around the world running their computers. So there are thousands of computers around the world that are basically running the Bitcoin software or the Bitcoin client. This hardware is specially designed for finding Nonce to validate block and hash. It requires a lot of CPU power to complete a simple task on bitcoin blockchain.
If you try to mine bitcoin right now with your smartphone or home computer, then you will End up losing your computer along with a hefty electric bill.
Fourth Component: Mining(Gaming Theory)
Miners are the users who are actually involved in gaming theory because bitcoin is truly a game that is run by these miners around the world. As we stated the first component is software for Bitcoin that issues a cryptography challenge in every 10 minutes. This cryptography challenge involves trying to find a Nonce which will make the hash for a specific block be valid. All the hashes and validation are done by these miners. After successful creation of block, Block is added to the blockchain.
Lets see how gaming theory works!