The operation of blockchain technology
Let’s start with a brief and straightforward explanation of what the Blockchain is before attempting to explain why there cannot be fake bitcoins.
Bitcoin and other cryptocurrencies rely on Blockchain technology, a type of electronic ledger that is public, universal, one-of-a-kind, permanent, and distributed, to record any transaction.
The blockchain contains a list of the blocks that have already been validated. In reality, the transactions are organized into blocks. Up until the first block, known as the genesis block, each block is sequentially and chronologically connected to its predecessor.
In this sense, the Blockchain functions as a sort of enormous database that holds the complete record of transactions in encrypted form.
The blockchain, as previously mentioned, is shared because a copy of it exists on each node—a computer running the cryptocurrency in question—that is a part of the network.
Because anyone can at any time consult a cryptocurrency transaction, its value, and the addresses involved, the blockchain database is open to the public.
The Bitcoin network uses thousands of nodes (computers) known as miners to process transactions. Additionally, these miners check the work of other miners who have already completed other transactions. The level of reliability is very high when transactions are verified collectively and in concert by miners, and we refer to this as “decentralized trust” because trust is distributed among all of the network’s nodes.
By doing this, it is possible to confirm, for instance, that none of the previous entries in the chain contain this transaction, which would suggest a duplicate or fraudulent transaction.
These checks within the blockchain would identify an agent, for instance, if he attempted to spend or use a counterfeit bitcoin or one that did not belong to him.
Making fake bitcoins: the value of decentralization
Due to the “distributed consensus” algorithm used by Bitcoin and other cryptocurrencies, which constantly distributes and evaluates multiple copies of a register to prevent fraud and mistakes, these digital currencies offer extremely high levels of security.
For instance, a person only needs to attack a small number of servers to completely destroy a centralized database, such as a corporate database.
On the other hand, it would be impossible for someone to completely destroy the blockchain without having access to every computer on the network, which is dispersed across the globe.
Therefore, unlike a traditional bank, Bitcoin can be decentralized thanks to the blockchain.
The individuals connected to the Bitcoin network, as previously mentioned, build it:
the users who use full node portfolios on their computers; users who have simple wallets on mobile phones or digital platforms; the nodes or miners who use their powerful equipment to verify and approve operations.
Data is sent to the blockchain whenever a transaction transferring bitcoins from user A to user B takes place. It will show up in the network’s archives that user A owns a specific amount of bitcoins in a specific digital wallet.
Every member of the network becomes a node, and in order for each operation to be recognized as distinct, there must always be consensus.
Because it is updated after every operation, the blockchain is also kept in constant sync. This implies that the information is consistent across the board, making it impossible to forge a bitcoin without fooling the entire network and changing the data encrypted in the “blockchain.”
To fraudulently manipulate or falsify a bitcoin, a hacker would need to possess more than 50% of the network’s power, which would require investing enormous sums of money.
Furthermore, if someone gained control of more than 50% of the network, they would immediately know about it, and as a result, all Bitcoin users would abandon the system because it would cease to be decentralized and lose its current value.