Ep. 14 [Block-Creation] Components of a block

Note
Gain a fundamental understanding of Cryptocurrency in an easy way. Before continue reading the story, I recommend to take a couple of minutes and read through the prior article again in order to refresh your present knowledge. The more often you read through the stories, the more confident you will get with the technology behind cryptocurrencies like Bitcoin. Take your time, to understand cryptocurrencies, as a Steemian it's worth it. The pictures are drawn by @RatzFratz, thanks for that!
If something in the story is not clear to you, don’t hesitate to ask. There are several people who might have the same question. So shoot me a comment, if something is unclear. Me and other readers will appreciate it!

In the last episode we saw that a Bitcoin-Miner is actually a Full-Node + Mining-Function. During the Bitcoin-Mining(= Mathematical Contest) the Bitcoin-Miner creates a block candidate which he wants to attach to the existing blockchain and therefore get a reward in Bitcoin. This block-candidate is filled with pending BTC-Transaction from the miners local “pending-list”.

If a Bitcoin-Miner wins the Mathematical-contest, he is able to attach his created block-candidate to the current blockchain.
So far we described this mathematical-contest as a mathematical-task which the miners have to solve with the help of their computers.

Now I want to talk more about the Mathematical-Contest. Therefore we need to take a closer look at the block-candidate first.

So in the last episode we said that a Bitcoin-Miner is creating a block-candidate before he joins the mathematical contest.

A block is identified by its individual block-number and in general it consists of two parts:

transactions-section

block-header

The transactions-section is quite clear. It contains all the pending bitcoin-transactions the miner included from his local pending transactions-list.

The block-header includes general information about the block-candidate itself. Lets take a closer look.
The block-header consists of following components:

Version: This shows the version of the “rulebook” which the Bitcoin-software follows. Basically it says which version of the rulebook the miner considered when formatting the block-candidate. This is not important for now. ignore it.

Timestamp: This number indicates when the Block was created. It is not important for now. Ignore it.

Reference: This numbers is the “Block-Number” of the latest block (NOT Block-Candidate) from the blockchain, which this block-candidate wants to refer. This is very important, we will see soon why.

Threshold: This number is given automatically from the Bitcoin-Software. You can see this threshold as a limitation for the possible Block-Numbers. It sounds complicated but you will see in a minute what that means.

Nonce: This is literally a random number the miner adds to the block-header. Soon we will see why the miner is doing that.

Merkle-Root: In general this is a number, which literally represents all the transactions from the transactions-section of the block.

This all sounds complicated and you might feel not-familiar with these numbers. For now just try to remember the names of the components in the block-header. In the next episodes you will understand not only how these components work together but also why they make the Bitcoin-System superior.