Blockchain Basics

A blockchain is a distributed ledger that records transactions across many computers in a way that makes it practically impossible to alter historical records.

What is a Blockchain?

At its core, a blockchain is:

1. A chain of blocks - Each block contains transactions and links to the previous block
2. Distributed - Copies exist on thousands of computers worldwide
3. Immutable - Once written, data cannot be changed without detection
4. Trustless - No central authority needed; math provides security

The Chain Structure

┌─────────────┐    ┌─────────────┐    ┌─────────────┐
│  Block 0    │───▶│  Block 1    │───▶│  Block 2    │
│  (Genesis)  │    │             │    │             │
├─────────────┤    ├─────────────┤    ├─────────────┤
│ Hash: 0x00..│    │ Hash: 0x1a..│    │ Hash: 0x2b..│
│ Prev: 0x00..│    │ Prev: 0x00..│    │ Prev: 0x1a..│
│ Txns: [...]│    │ Txns: [...]│    │ Txns: [...]│
└─────────────┘    └─────────────┘    └─────────────┘

Each block contains:

• Block Header: Metadata including previous block hash
• Transactions: The actual data being recorded
• Hash: A cryptographic fingerprint of the block

How Transactions Work

The UTXO Model

BTQ (like Bitcoin) uses the UTXO (Unspent Transaction Output) model:

1. Outputs: When you receive coins, a UTXO is created
2. Inputs: When you spend, you consume entire UTXOs
3. Change: Excess goes back to you as a new UTXO

Example:

Alice has: 10 BTQ (one UTXO)
Alice sends Bob: 3 BTQ

Transaction:
  Input:  10 BTQ (Alice's UTXO) - consumed entirely
  Output: 3 BTQ to Bob (new UTXO)
  Output: 7 BTQ to Alice (change UTXO)

Transaction Structure

Transaction:
├── Version: 2
├── Inputs:
│   └── Previous TX ID + Output Index
│       └── Signature (proves ownership)
├── Outputs:
│   └── Amount + ScriptPubKey (locking script)
└── Locktime: 0

Digital Signatures

Digital signatures prove ownership without revealing private keys.

How They Work

1. Key Generation: Create a private key (secret) and public key (shareable)
2. Signing: Use private key to sign a message
3. Verification: Anyone can verify using the public key

Private Key ──┬──▶ Sign(message) ──▶ Signature
              │
              └──▶ Public Key ──┬──▶ Verify(message, signature)
                                │
                                └──▶ true/false

In BTQ

• ECDSA: Original Bitcoin signatures (33-byte public keys, ~71-byte signatures)
• Dilithium: Quantum-resistant signatures (1,312-byte public keys, 2,420-byte signatures)

Addresses

Addresses are derived from public keys and provide a destination for funds.

Address Derivation

Private Key
    │
    ▼
Public Key
    │
    ├──▶ SHA-256
    │       │
    │       ▼
    │    RIPEMD-160
    │       │
    │       ▼
    └──▶ Public Key Hash (20 bytes)
            │
            ▼
    Base58/Bech32 Encoding
            │
            ▼
        Address

BTQ Address Types

Mainnet forms shown. See Dilithium Addresses for all networks.

Blocks

Blocks are containers that group transactions together.

Block Structure

Block Header (80 bytes):
├── Version (4 bytes)
├── Previous Block Hash (32 bytes)
├── Merkle Root (32 bytes)
├── Timestamp (4 bytes)
├── Difficulty Target (4 bytes)
└── Nonce (4 bytes)

Block Body:
└── Transactions (variable)

The Merkle Tree

Transactions are organized into a Merkle tree:

              Root Hash
             /        \
        Hash01        Hash23
        /    \        /    \
    Hash0  Hash1  Hash2  Hash3
      │      │      │      │
    Tx0    Tx1    Tx2    Tx3

This allows:

• Efficient verification of transaction inclusion
• Light clients to verify without downloading entire blocks
• Tamper detection (any change alters the root hash)

The Peer-to-Peer Network

BTQ operates as a decentralized network:

Node Types

Network Communication

Nodes communicate via a gossip protocol:

1. Transaction Broadcast: New transactions spread across the network
2. Block Propagation: New blocks are relayed to all nodes
3. Peer Discovery: Nodes find each other via DNS seeds and peer exchange

Validation Rules

Every node independently validates:

Transaction Validation

• Inputs exist and are unspent
• Signatures are valid
• Input amounts >= output amounts
• Scripts execute successfully

Block Validation

• Block header hash meets difficulty target
• Previous block exists and is valid
• All transactions are valid
• Block size within limits
• Timestamp reasonable

Finality

Blockchain transactions become increasingly final over time:

Why This Matters for BTQ

BTQ inherits all of Bitcoin's blockchain properties:

• Decentralization: No single point of failure
• Transparency: All transactions publicly verifiable
• Immutability: History cannot be rewritten
• Security: Cryptographic guarantees

The only change is upgrading the signature algorithm to resist quantum attacks.

Learn More

• Consensus & Proof of Work - How agreement is reached
• The Quantum Threat - Why quantum resistance matters
• BTQ Architecture - Technical deep dive