4  Blockchain

X wants to Pay Y in Bitcoin

X needs Y’s public key and X’s private key

Miners validate that X has sufficient bitcoins by checking

the public ledger (DLT)

X uses a Bitcoin app or a wallet through browser or

smartphone to transfer the bitcoin to Y

Public

Private

App mathematically combines the pubic and private keys

with the instructions on number of bitcoins to remit and

broadcast this information to the bitcoin miners on the

network

Miners race to package the transaction in a block with

other pending transactions in addition to the last block of

transactions recorded on the public ledger Plus a random

number (called nonce)

Miner to first solve the cryptography puzzle (hashing)

using the correct nonce wins the reward in bitcoins and

publishes the new block in the public ledger

76681a4b3d1d05e30e

9e50ad071aef3d

X and Y receive confirmation that bitcoin was successfully

transferred and noted on the public ledger (aka DLT)

Figure 1.1  How Bitcoin works?