# Gavin Andresen
# 2010-07-05 20:29:59
# https://bitcointalk.org/index.php?topic=235.msg1975#msg1975

An example of how bitcoin works on a bit-level:  Ok, I'll give it a shot. @p{par}

Here's what the current best-block (according to my bitcoin client) looks like, dumped in a geek-readable format: @p{par}

BLOCK 68fa61ac1f55a5787dfa0c75bc83e67376ae8356e6887a2ab74cdb0900000000 @p{brk}
Next block: 0000000000000000000000000000000000000000000000000000000000000000 @p{brk}
Time: Mon Jul  5 15:51:22 2010 @p{brk}
Previous block: c18adb50289393b5a995b3506f039ac75e8de79f511515448811510200000000 @p{brk}
3 transactions: @p{brk}
1 tx in, 1 out @p{brk}
['TxIn: COIN GENERATED coinbase:0442310d1c029c00'] @p{brk}
['TxOut: value: 50.00 pubkey: 17sdrb1X7qpjPMJortqaNwWtBbtouSoJn2 Script: 65:046d...bb9c CHECKSIG'] @p{brk}
1 tx in, 1 out @p{brk}
['TxIn: prev(580a...e82e:0) pubkey: (None) sig: 71:3044...db01'] @p{brk}
['TxOut: value: 50.00 pubkey: 1FeFgJRvCYUTCBj1u696eL23xpAdNB4B8p Script: DUP HASH160 20:a09d...6d81 EQUALVERIFY CHECKSIG'] @p{brk}
3 tx in, 1 out @p{brk}
['TxIn: prev(c0a0...6bc3:0) pubkey: (None) sig: 73:3046...0f01', 'TxIn: prev(f909...2493:0) pubkey: (None) sig: 73:3046...1601', 'TxIn: prev(bc0a...fe64:0) pubkey: (None) sig: 72:3045...6201'] @p{brk}
['TxOut: value: 150.00 pubkey: 1BHxjkqPmtNdmJxLZgneijvGszRxM9hPkz Script: 65:04ee...1d02 CHECKSIG'] @p{par}

So:  that big long string of hex at the top is the block header's hash value.  Note that it ends with 8 zeroes; that's the proof-of-work  (my utility for dumping blocks doesn't bother dumping the Nonce values). @p{par}

What's hashed in the block header?  The Nonce.  The block's generation time.  The previous block's hash.  And a hash of all the transactions in the block. (and probably some stuff I'm forgetting). @p{par}

This block has three transactions in it.  The first is the 50.00 (which is really 5,000,000,000 of the smallest possible units) reward for finding/creating the block.  It can only be spent by whoever has the private key that matches the public key in the TxOut  (17sdrb1X7qpjPMJortqaNwWtBbtouSoJn2 @p{--} you can think of public keys and bitcoin addresses as equivalent), which will be whoever generated the block. @p{par}

The second is a payment of 50.0 from.... somebody... to... somebody.   How does Bitcoin know that transaction is valid?  Well, it: @p{brk}
 + Looks up the previous transaction.  That's the TxIn: prev(580a...e82e:0)  stuff@p{--} fetch TxOut zero (which will be a coin generated txn) from previous transaction 580a.... @p{brk}
 + EVALUATE(TxIn.pubkey + previous transaction TxOut.pubkey) and make sure it evaluates to true.  This is where the cryptography happens; the receiver uses the private key known only to them and provides a correct digital signature. @p{par}

The third is a payment of 150.0 (three 50.0-value in, one 150.0-value out). @p{par}

Clear as mud? @p{par}

 @p{brk}