Introduction

https://player.vimeo. com/video/648430061

As we have seen, nodes participate in the process of collecting and time-stamping transactions. They maintain the network by following some very clear instructions from Section 5 of the Bitcoin whitepaper, and by managing those directives under a set of rules which are collectively enforced by nodes using Nakamoto Consensus. This is reiterated in the Bitcoin whitepaper several times, including the final sentence which reads “Any needed rules and incentives can be enforced with this consensus mechanism”.

In this next section, we will explore how these directives not only make sense from an operational perspective, but through that perspective create an incentive driven interconnected behaviour which leads to the nodes spontaneously forming a ‘Small World Network’, which trends towards a Nearly Complete Graph.

The word ‘spontaneously’ is used to reflect the fact that there is no centralised leadership driving this behaviour, and that the system remains robust even when well-connected nodes leave, are disconnected, or the network is otherwise disrupted. Due to the compensation mechanism, there is a very strong incentive for nodes to ensure that new transactions and valid block hashes reach other effective network nodes as quickly as possible.

https://player.vimeo. com/video/649874007

In this section we will look at some of the key incentives that are driven by the proof of work process, including hyper connection at the densest layers of Bitcoin’s core network.