Gareth Johnson
Gareth Johnson
Updated on December 15, 2021

Digital currencies are the newest medium of exchange in this digital world. Most of these digital assets, such as Bitcoin (BTC), Ethereum (ETH), Bitcoin Cash (BCH), or Litecoin (LTC), are developed using blockchain technology.

Briefly said, the blockchain consists of numerous blocks linked in a chain. These blocks contain the transaction data carried by the digital coins.

In this article, we’ll focus on Bitcoin’s blocks, the Bitcoin blockchain, the structure of the Bitcoin block, and the mining process behind this coin.

Let’s get started!

What Is a Bitcoin Blockchain?

The Bitcoin network is created on a distributed public ledger (DPL) that makes a record of the ownership of all BTC, the native digital currency token of the Bitcoin network. All the new transactions are assembled together into blocks and these blocks are sequentially attached to the Bitcoin network’s ongoing chain of blocks. This blockchain keeps track of every single block since its formation.

Hand holding bitcoin beside hourglass

Every computer device (or node) worldwide which runs BTC software hosts an identical copy of the BTC blockchain. These nodes are also known as Bitcoin miners, and they serve the purpose of confirming the BTC transactions and keeping the blockchain ledger safe.

Unlike traditional banking, where we send money, such as USD, from one bank account to another, with banks playing the role of a middleman, when it comes to Bitcoin, the centralized middlemen are replaced with a trustless network of miners. This way no single central authority has control over the blockchain, and this makes the Bitcoin blockchain decentralized.

What Is a BTC Block?

The Bitcoin network deals with a substantial amount of transactional activity daily. Keeping a record of all the transactions is crucial in keeping the network safe. Whenever a third party tries to tamper the blockchain data, the node operators can easily spot the inconsistencies in the blocks.

To put it simply, every Bitcoin block contains a piece of information from a previous block, i.e. a reference to the block preceding it, which, together with the peer-to-peer Bitcoin protocol for authentication, makes it digitally impossible for someone to hack the blockchain.

There are three types of Bitcoin blocks on the blockchain:

  • Genesis block. This block is the first block on the blockchain. The genesis blocks are considered the foundation of all blockchains, and the first genesis block in the digital currency world was mined by Satoshi Nakamoto, the creator of Bitcoin.
  • Valid block. A valid block is every block that has ever been mined and has been added to the Bitcoin blockchain. Valid blocks are the type of blocks that enable the activities within the blockchain and the Bitcoin transactions.
  • Orphan block. An orphaned or loose block is a valid block that isn’t a part of the Bitcoin blockchain. This usually happens when a couple of miners find the block solution at the same time but only one gets accepted, or these blocks can be a product of a hacker that has sufficient hashing power and makes an attempt to reverse a transaction. 

The Structure of the Bitcoin Block

The Bitcoin block has a limited size of around 1 MB of data. However, when it comes to the so-called Segregated Witness (SegWit) blocks, these blocks have a limited transaction data of 1 MB, and a signature data, the so-called witness, that’s limited and segregated to hold up to 3 MB additional data. This means that the size of the block is set at 1 MB, but the space for the transaction data of the block is raised up to 3 MB.

3D chain with binary code written on dark background

In comparison, Bitcoin Cash, a cryptocurrency developed as a hard fork of the Bitcoin blockchain, has a block size of 8 MB, and this allows more transactions to be processed per second.

Every Bitcoin block is composed of two things: block header and transaction data.

The block header is 80 bytes and contains three sets of block metadata. The first set of metadata consists of the hash of the previous block, which links this block to the preceding block in the Bitcoin blockchain, and it’s 32 bytes. The second set of metadata contains the timestamp, the difficulty target of the current block, and the nonce, which are in close relation to the mining competition, and each of them has a size of 4 bytes. Finally, the third set of metadata is the Merkle tree root, which is a data structure that’s used to effectively sum up all the BTC transactions in a block, and its size is 32 bytes. The last 4 bytes are for the version number for tracking protocol/software upgrades.

Each transaction data consists of the version number of the transaction, its inputs and outputs, and the lock time. Additionally, SegWit transactions contain flags and witnesses.

Bitcoin Mining Explained

A new block can be created through Bitcoin mining. This means that the Bitcoin miners are the ones that create a new Bitcoin block by solving a complex mathematical problem. Once the miner finds a valid solution for the Bitcoin network, a new block will be attached to the blockchain by agreement. The miner who solves the math problem receives a reward for the newly founded block – a fixed number of bitcoins (plus the BTC network transaction fee), known as a block reward.

Vector illustration of miner underground mining bitcoin with mining cart

A new block is added to the Bitcoin blockchain every 10 minutes, so after one block has been mined, the mining process for the next block starts immediately. But, the real question is: How is the mining process done? The mining process consists of seven stages.

Transaction Stage

The mining process for a new block begins with an incoming Bitcoin transaction, sent by a user who wants to transfer a particular amount of BTC to another user. After the user sends the transaction, its first destination is the mining pool where it waits to be pulled out by a Bitcoin miner in order to be confirmed.

Compilation Stage

These outgoing Bitcoin transactions on the Bitcoin network are gathered and assembled into block transactions by the mining nodes. TAll of these transactions are considered unconfirmed until the Bitcoin block has been mined.

Solution Stage

Every Bitcoin miner chooses a transaction they’ll try to include in the new block they’re about to create. However, if some of the transactions have already been confirmed and added to the previous block, they will be removed from the potential new block at this stage. This potential new block is only a possible candidate, due to the fact that it isn’t valid at this point, as it lacks Proof-of-Work.

Proof-of-Work (PoW) Stage

Every miner has to conduct a complex mathematical calculation that’s unique for every block. For conducting these complex calculations, the miner uses a great amount of computing power and electricity.

The solution for the math problem that the Bitcoin miners have to find is called a hash. The hash is found through the SHA-256 algorithm that’s part of the Proof of Work process.

3D illustration of bitcoin icons in circuit

In order to discover the right output hash, the Bitcoin miners have to repeat certain math calculations multiple times by the use of a nonce. A nonce is a random number used by the miners and altered till the right hash has been found. The miners cannot predict which nonce will be the solution for the math puzzle, so they have to use numerous different nonces and try over a billion different values in a matter of seconds.

Transmission Stage

When the miner succeeds in finding the right output hash for the block, they transfer this particular block along with the signature into the Bitcoin network, so the other miners can validate the output hash.

Confirmation Stage

This is the final stage of the mining process where the new block has been confirmed by the nodes and is attached to the blockchain. When a Bitcoin block is created, the mining nodes have to start the process all over again and form a new block with the remaining transactions.

A Few Words Before You Go…

As you can see, the Bitcoin block represents the foundation of the Bitcoin blockchain and the way it’s mined helps secure the Bitcoin network from hacker attacks. You might think of it as a complex process but one that’s worth the trouble as it provides a safe and decentralized payment environment that appeals to individuals all over the world.