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The bitcoin blockchain is essentially an enormous, shared, encrypted list of which addresses hold what bitcoin balances. Every new block represents the latest update to account balances after some further mining takes place or a transaction occurs where bitcoin is exchanged. When a transaction is submitted to the bitcoin network, the information is passed on through all bitcoin clients at the same time through the blockchain.

The blockchain network is designed to make double-spending very difficult, though breaches have occurred in the past. In this way, it functions much like a public ledger, accounting for economic transactions and providing some verification that all bitcoin users are equipped with the same information.

Records in Each Block

Blockchains consist of a series of individual blocks, each in chronological order and linked by accounts. Each block's record shows at least one transaction, though many valid transactions can be represented in a single block.

Other kinds of information in a block include a timestamp and the "hash" of the previous block. There are no hashes for genesis blocks because these blocks have no predecessor. A block also includes the block's own hash and a "difficulty statement." Difficulty refers to the amount of bitcoin that can be created with bitcoin mining equipment; it is directly correlated with the present demand for bitcoins.

Anonymity

One of the alleged benefits, or risks, of bitcoin is its unique anonymity. Those transacting in bitcoins are supposed to be tied to a specific bitcoin address rather than a personal name or email. Yet, anonymity is somewhat compromised because of the blockchain information ledger. Since every transaction is publicly logged, one single breach of ownership identity could lead to the revelation of many other owners by simply following the transactions. The blockchain is still more anonymous than a bank statement, but it is not an impenetrable veil of secrecy as some assert. Even the name, or pseudonym, of the bitcoin founder is known.

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