The miners are able to validate transactions without the need for a central authority by using a decentralized system that combines cryptographic validation, consensus mechanisms and economic incentives. This is a breakdown of the process.

1. Initial checks and Transaction Propagation

• The peer-to-peer system is notified when a user initiates an action (such as sending cryptocurrency).
• The transaction is received by the nodes and miners, who perform initial verification.
  • Digital Signatures Verify the sender’s cryptographic signature in order to verify ownership of the funds.
  • Validation of Input: Verify that the inputs for transactions (references from past outputs not yet spent) are valid and haven’t been already used.
  • Double Spending Prevention : Verify that the sender’s outputs (UTXOs, Unspent Transaction Outputs) are present in the blockchain.

2. Blocking Transactions

• The miners will collect all valid transactions and place them in a block of candidates. Each block includes:
  • A header with meta-data (e.g. timestamp or reference to previous block’s hash).
  • Merkle tree-root hashing of all transactions ensures data integrity.

3. Consensus Mechanism for Proof of Work (PoW),

• The block header is a cryptographic puzzle that requires a lot of computational power. The challenge involves finding a random number that will allow the block hash to meet a predefined target difficulty (e.g. starting with a specific number of zeros).
• This process is called hashing and requires massive computing power. It’s resource-intensive, as well as time-consuming. The difficulty is adjusted periodically to maintain a constant block creation rate.

4. Block Validation and Propagation

• The block is broadcast to the network by the first miner who solves the puzzle.
• Other nodes can be used independently
  • Verify that all transactions in the block are valid and double-spent.
  • Verify the PoW solution in order to verify that the miner has made an effort and is meeting the current difficulty.
• Nodes will add the block to their own copy of the blockchain if it passes the checks. This extends the ledger.

5. Decentralized Consensus

• Consensus can be achieved by longest chain rule. Nodes will always choose the longest valid chains, since they represent the most cumulative computational work. This prevents malicious acts from altering previous blocks as it would require remining subsequent blocks – a near impossible feat because of the network’s hashing power.

6. Motivating Honest Behavior

• The miner is rewarded with blocks rewards and transaction fee when adding valid blocks. This encourages miners to adhere to the protocol rules as blocks that violate the rules (e.g., those containing invalid transactions), are rejected by the network and the miner loses rewards.

7. Security through Cryptography and Decentralization

• Hashing : The hash of each block is calculated from its content, creating a link that cannot be changed to the previous block. A single transaction can change the hash of a block, breaking the chain.
• Redundancy of the Network: The blockchain is duplicated by thousands of nodes, which ensures that there is no single point failure. Even if malicious nodes are present, honest nodes will dominate the network.

The Key Takeaways

• No Central Authority : Trust is distributed throughout the network using mathematical rules and consensus protocols.
• Immutability : Once a block has been confirmed, changing it would require impractical computational resources.
• Transparency : All transactions can be verified by the public, which encourages accountability without central oversight.

Combining cryptographic verification with economic incentives and decentralized consensus to maintain the integrity, miners can collectively ensure the integrity of blockchain. This allows for trustless transactions within a secure permissionless system.

Read : What cryptographic principles underpin blockchain immutability?