Take a look at
https://en.bitcoin.it/wiki/Blocks and follow the links on that page. Also join the IRC channel.
Each record of a transaction is called a block.
No. This seems to be your main point of confusion. A block contains multiple unrelated transactions. The block chain is every block in order of creation. The block chain is used to securely record the ordering of transactions, preventing people from spending the same coins twice. Most users don't produce blocks -- they only produce transactions, which other users put into blocks.
stating that node now has x fewer coins and the receiving node now has x more coins
Balances aren't used, and everything is done by address. A transaction "redeems" a previous transaction, gaining all coins from it. Then it sends these coins to one or more addresses. Then these recipient addresses can redeem this transaction at any time in order to send the bitcoins that they were assigned.
what exactly is being encrypted.
The transactions are digitally signed. Nothing is encrypted.
What is to stop someone else from sending a message to the network stating that he is you and he transacts x funds to y account
He doesn't have the private key associated with your Bitcoin address, and he can't find it in a reasonable time. Read:
http://en.wikipedia.org/wiki/Public-key_cryptographyThe Bitcoin address is a public key (a hash of the public key, actually, but it doesn't matter in this case). The private key is stored in your wallet.dat.
i cant for the life of me figure out how [proof-of-work] factors into the whole bitcoin equation
In order to produce a block, you need to solve a proof-of-work. This prevents people from re-doing the entire block chain and ruining the guaranteed ordering property that we need.
Bitcoin's proof-of-work works like this:
- Everyone in the network agrees on a target number, which determines the difficulty of generating a block.
- People trying to generate blocks create random numbers in a way that allows everyone else in the network to verify that the numbers are actually random. (They hash their temporary block.)
- If their number is lower than the target, then their block is valid.
Also isnt it possible that two different public keys could return the same hash value, i know its unlikely but if people are using this service 100 years from now on a global scale there could be a LOT of transactions by then.
If every person on Earth makes ten addresses per second for 20 years (2x1018 total addresses), then the probability that two of these addresses collide is about 1.57x10-12.
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