Bitcoin Whitepaper — Annotated Guide

# 5. Network

The steps to run the network are as follows:

1. New transactions are broadcast to all nodes.
2. Each node collects new transactions into a block.
3. Each node works on finding a difficult proof-of-work for its block.
4. When a node finds a proof-of-work, it broadcasts the block to all nodes.
5. Nodes accept the block only if all transactions in it are valid and not already spent.
6. Nodes express their acceptance of the block by working on creating the next block in the chain, using the hash of the accepted block as the previous hash.

> 💡 In plain terms
> These six steps are the entire operating procedure of the Bitcoin network.
> Let's walk through them in plain terms:
>
> 1. You broadcast your transaction to the network — like shouting it in a public square.
> 2. Miners (nodes) collect recent transactions into a candidate block.
> 3. Each miner races to solve the proof-of-work puzzle for their block.
> 4. The winner broadcasts their solved block to everyone else.
> 5. Other nodes check the block: Are all transactions valid? Has any coin been spent twice?
>    If yes → accept. If no → reject.
> 6. Acceptance is shown by immediately starting to build the next block on top of this one.
>    This is how the chain grows.
>
> There is no headquarters. No CEO approving blocks. No business hours.
> The network runs itself, 24/7, guided only by these six rules.

Nodes always consider the longest chain to be the correct one and will keep working on extending it. If two nodes broadcast different versions of the next block simultaneously, some nodes may receive one or the other first. In that case, they work on the first one they received, but save the other branch in case it becomes longer. The tie will be broken when the next proof-of-work is found and one branch becomes longer; the nodes that were working on the other branch will then switch to the longer one.

> 💡 In plain terms
> What happens if two miners solve a block at the exact same moment?
> You get a temporary fork — two competing versions of the chain.
>
> Bitcoin resolves this automatically and elegantly: miners work on whichever branch they saw first, but keep the other.
> The moment one branch gets a new block added — making it longer — everyone switches to that branch. The shorter branch is simply abandoned.
>
> No vote, no committee, no admin decision.
> The longest chain wins. Always.

New transaction broadcasts do not necessarily need to reach all nodes. As long as they reach many nodes, they will get into a block before long. Block broadcasts are also tolerant of dropped messages. If a node does not receive a block, it will request it when it receives the next block and realizes it missed one.

> ⚡ Why It Works vs. Traditional Finance
> A bank's payment network is centralized: if the central server goes down, payments stop. If your country's financial infrastructure is sanctioned, payments stop. If the network is overloaded, payments slow or stop.
>
> Bitcoin's network has no central server to take down.
> Every node is equal. Every node holds a full copy of the rules.
> Even if large portions of the network went offline simultaneously, the remaining nodes would continue producing blocks.
> The system degrades gracefully instead of failing catastrophically.
> This is what engineers call fault tolerance — and traditional payment networks, by design, do not have it.

Bitcoin Network

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