Homework on Bitcoin Ecosystem - Questions
1. What is the difference between a SPV (simplified payment verification) and a full node?
A SPV is a wallet or device containing a users private key (PK) which allows the user to access blockchain ledger containing unspent transactions (UTXOs). An SPV combines sufficient UTXOs together complete the require transaction, but requires access to a full network node to broadcast this request with the unspent transactions returning to the users nominated output address.
A full node can include the users PK, normally does not for reasons of security. A full mode includes a copy of the entire blockchain ledger which records all confirmed transactions. A full node has the ability to transmit/propagate the blockchain through the network and contains a copy of the mempool - UTXOs. A full mode also provides access to miners who produce/hash the next block within the blockchain ledger.
2. What does it mean when a transaction is broadcasted?
The SPV or full node has confirmed via concensus the requested transaction is valid, and has combine sufficient input UTXOs together complete the transaction for broadcast to the blockchain network.
3. How does a miner pick which transactions that gets added to the next block?
The miner accesses a full node’s mempool selecting UTXOs to combine together which produce the highest blockchain transaction fee. The selected UTXOs are hashed together based; on the previous hashed blockchain plus a random number to produce a hashed block number which is below the network’s target number for inclusion within the blockchain.