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So, now let's talk about how
Bitcoin blocks get put together.

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So we've been talking
about the blockchain and

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the fact that transactions
are actually grouped by blocks.

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But everything in this lecture so far,

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we've been talking about just individual
transactions getting published.

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So why do we group transactions
together into blocks?

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Well, a couple reasons.

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One is that that creates a nice,
single unit of work for

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miners that's bigger that
the individual transaction size.

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So if the miners had to do work and
do hashing and add metadata for

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every transaction in the system,
that would provide too much overhead.

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It also makes the hash
chain of blocks shorter

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because we only need one block for
a large number of transactions.

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And that's going to make it easier for us
to verify the blockchain data structure.

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So what does the blockchain
data structure look like?

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It's a pretty clever combination of two
different hash-based data structures.

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So on the top here,
we have a hash chain of blocks.

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Each one has a block header and
then a pointer to some transaction data,

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as well as pointer to the previous
block in the sequence.

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And remember these are hash pointers.

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And then we have a tree of all of
the transactions that are included in

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each block.

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So this is a hash tree or
what's called a Merkle tree.

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Which commits to all of the transactions
in the block in quite an efficient way.

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So it's easy to provide just the path
through the tree which will be logarithmic

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in size to prove that that transaction
is included in a specific block.

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So that's the high level
idea behind the block.

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What does it look like in
practice at the low level?

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So we'll do another deep dive
into the actual data here.

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So this is what a Bitcoin
block looks like.

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There's what's called the block header
which has all of the metadata for

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that block.

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And then there's that Merkel
tree of transactions.

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So basically a long list of transactions.

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All of the hashes are arranged in
this tree structure, which gives you

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the ability to efficiently prove which
transactions are included in a block.

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The most important part, of course, is
the header, which mostly has information

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related to the mining puzzle, which was
talked about in the lecture on consensus.

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And we'll revisit in
the lecture on mining.

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But recall that the most important thing
here is that the hash of the block header

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has to start with a large number of
zeros for the block to be valid.

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And then there's some other
data to make that happen.

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There's a nonce that miners can change.

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There's a time stamp.

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There's an indication of how
difficult this block was to find.

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That's all stored in the header.

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And the important thing is that
the header is the only thing that's

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hashed during mining.

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So to verify that chain of blocks,
all you need to do is look at the headers.

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And the only transaction data
that's included in the header

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is that one route of the transaction tree.

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So that's this mrkl_root parameter.

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The other thing that's interesting about
blocks is that they have one special

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transaction in the Merkle tree which
is unlike all the other transactions

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we looked at before.

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And this is the coin-based transaction.

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So this is where the creation
of new coins in Bitcoin happens.

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It mostly looks like a normal
transaction with a few exceptions.

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So the value of this transaction is
going to be equal to currently a little

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over 25 Bitcoins.

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As we discussed, this is a flat mining
reward which is set by the system and

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which is halving every four years.

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In practice it will be a little
bit more than 25 Bitcoin,

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because it also gets to include
the transaction fees collected from

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every transaction included in the block.

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So the pointer to the output transaction
that this coinbase transaction is

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receiving is a null pointer.

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It's a hash of all zeroes.

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And this is an indication that since
this is the creation of new coins,

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there is no antecedent.

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There's no previous transaction that's
being consumed to create these coins.

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And there's also this special
coinbase parameter, and

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the coinbase parameter
is completely arbitrary.

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The miners can put whatever
they want in there.

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So, famously,
in the very block ever mined in Bitcoin,

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the coinbase parameter had
a quote from the newspaper.

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It had a quote from the Times of
London describing a story involving

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the chancellor bailing out banks,
which was both a political commentary on

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the motivation for starting Bitcoin, and
served as a commitment that Bitcoin,

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the first block was obviously mined
after this newspaper came out.

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But since then,

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miners are free to put whatever they
want in the coinbase parameter.

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It's been used as a place to put some
arbitrary data for different reasons.

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To signal support by miners for
new features, but

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there's no actual limits on
what miners can put in there.

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So with the block format and
the transaction format that we described

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earlier, the best way to learn
it is to just see for yourself.

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So there's a lot of websites
that make this data accessible.

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This is a screenshot from blockchain.info
which I found very helpful

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myself in understanding and exploring
what's going on at a low level in Bitcoin.

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There are a lot of other websites that do
a great job of making this information

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accessible.

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So you can look at
the graph of transactions,

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see which transactions redeem
which other transactions.

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Look for
transactions with complicated scripts,

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even look at the block structure and
see how blocks refer to other blocks.

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It's all available online, because again,
the Bitcoin is a public data structure, so

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a lot of different people
have put very pretty wrappers

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around this to explore it graphically.