Peer to Peer
Traditionally, networks are centralized: there is a server farm where files, applications, and other data reside, and clients that access that data.
A good example of this is visiting a website. Your web browser is the “client”, requesting data from the website and the “server”, where the website resides, provides the data you requested. Your browser receives the necessary data from the server and the website is displayed in your browser.
In this traditional client-server model, the network is entirely dependent on the server and the people and organizations that maintain the server farm and keep it connected to the internet.
The Bitcoin network is different. With Bitcoin, all the devices running Bitcoin software act as both a client and a server. Each device can share information with all the other devices who are also running Bitcoin software.
In this arrangement, there are no central servers and, as a result, the network is far more robust as it does not depend on any one server or organization. This decentralized network design is called a peer to peer network and is a fundamental building block of Bitcoin.
Nodes essentially are the Bitcoin network. Any computer or server running Bitcoin software is commonly referred to as a “node”. As the Bitcoin network is peer to peer, each node acts as a client and a server, sharing information with other nodes and forming the backbone of Bitcoin.
As a client, nodes receive the entire blockchain of transactions from other nodes and as a server, they also share the blockchain with other nodes. This ensures that everyone participating has the same data without requiring any central servers.
Beyond simply ensuring that everyone has the data in the blockchain, nodes also distribute and validate individual transactions. When a node receives a transaction, it checks the blockchain to ensure that the sender actually has the bitcoin to spend, that they have proof that they are authorized to spend the bitcoin, and that the recipient is a valid address. Nodes will only forward valid transactions to other nodes. This ensures only valid transactions are sent through the network and invalid ones are dropped.
The more nodes that exist, the more robust the entire network becomes as each one enforces the rules of the network and verifies that all the transactions are valid.
Currently there are nodes participating in the Bitcoin network and growing.
While nodes distribute the blockchain, validate transactions, and ensure rules are followed – miners add new blocks of transactions to the blockchain.
Miners are actually nodes themselves, but instead of simply forwarding transactions to other nodes, miners group recent transactions into a block that is then added to the blockchain.
When a transaction shows up in a block, it said to be “confirmed” and that transaction is forever locked in the blockchain for all to see.
In exchange for running the mining software that enable these new blocks to be created, miners are rewarded with newly minted bitcoin. This is how new bitcoin is created. For every new block added to the blockchain, currently 12.5 new bitcoin is given to the miner that added the block.
However, the process of mining involves a computer solving a complex mathematical equation and while there are many miners, for each new block, only one miner will be awarded the new bitcoin. Thus, for miners, it is a race to solve this mathematical problem the fastest.
As the value of Bitcoin has increased, the potential earnings from mining has grown dramatically. Massive resources are now put into mining as miners have gone from using a single computer to mine Bitcoin to giant warehouses full of specialized equipment.
Because many miners group their resources together in a mining “pool”, it is difficult to identify exactly how many miners exist. However, one measure of the Bitcoin network’s mining capacity is the total hash rate. This is the collective speed of all the miners combined and you can see from this chart how it has grown over the last few years.
The Bitcoin network is a peer-to-peer network, meaning that all nodes connected to the network serve as both a client (party requesting data) and a server (party delivering data to the client).
Nodes are just devices running bitcoin software and essentially are the network. They send and receive data to each other, validate that transactions are following the rules, and distinguish between false and legitimate transactions. This ensures, among other things, that no Bitcoin transactions have been placed in the same block twice – an attempt to double spend. If rules are not followed - nodes will reject the new block entirely.
Miners are the workhorses of the network, contributing the most resources in terms of electricity and equipment. Miners add transactions to blocks that make up the blockchain, confirming that transactions have taken place, and get rewarded in new bitcoin for the work.
While the Bitcoin network is robust, it is still dependent on internet connectivity. Learn how Blockstream Satellite is changing this, making the Bitcoin network more available and reliable than ever.