verification, confirmation and adding to the block chain

[Jet Cash]

I'm running the latest version of bitcoin core, and I had an inbound transaction on 26/12/2015. So far it has had 2,636 confirmations. I suspect my understanding of trandsaction recording is flawed. I thought that transactions were verified by full nodes, and flagged if they were faulty for some reason. they were only confirmed when a miner added them to a new block that was added to the blockchain. It seems that this is not correct. If there are 2,636 confirmations recorded, then they have to be in the blockchain somewhere - or do they? So what is the entry in the miner's block that lets him grab the transaction fee? There can't be 2,636 nodes sharing one small fee.

[shorena]

I'm running the latest version of bitcoin core, and I had an inbound transaction on 26/12/2015. So far it has had 2,636 confirmations. I suspect my understanding of trandsaction recording is flawed. I thought that transactions were verified by full nodes, and flagged if they were faulty for some reason. they were only confirmed when a miner added them to a new block that was added to the blockchain. It seems that this is not correct. If there are 2,636 confirmations recorded, then they have to be in the blockchain somewhere - or do they? So what is the entry in the miner's block that lets him grab the transaction fee? There can't be 2,636 nodes sharing one small fee.

A transaction is put into a block with its first confirmation. This is rewarded. Every following "confirmation" is just another block found on top of the block that has the transaction in it. That is not rewarded.
Since the blockchain can fork, its still important (to some degree) to track the number of confirmations. Its really uncommon now that a reorganisation of blocks occurs, but it was more common when the strength of the network (in hash power) was lower than today. Thats also why most wallets count the first 6 confirmations until they visually mark the transaction as fully confirmed.
That your transaction is affected by a reorganisation of blocks is less common the deeper it is burried by blocks (the more confirmations it has).

[Jet Cash]

No wonder the blocks are so large if over two thousand blocks contain details of each transaction.

[shorena]

No wonder the blocks are so large if over two thousand blocks contain details of each transaction.

No only the first has the information about the transaction. The second only holds a reference to the previous block. Thus blockchain.

[Jet Cash]

Thanks for the answers, and sorry to keep asking questions.

So how does my node know that there are 2,600+ confirmations? Each of those must be stored somewhere. Are they all stored in my PC then?

[shorena]

Thanks for the answers, and sorry to keep asking questions.

So how does my node know that there are 2,600+ confirmations? Each of those must be stored somewhere. Are they all stored in my PC then?

2600 confirmations are: 1 for the block that has the transaction and 2599 for blocks that create a chain of blocks after the first. If you run a full node all those blocks are on your machine. If not, the wallet still keeps track of the number of blocks found.

[Jet Cash]

I think I understand. There is only one record of the transaction, but because nobody has failed it, all of the subsequent blocks are deemed to have confirmed it.

[shorena]

I think I understand. There is only one record of the transaction, but because nobody has failed it, all of the subsequent blocks are deemed to have confirmed it.

Subsequent blocks can only confirm it, otherwise they would either be invalid (because its a real double spend) or a competing block for the same spot. It is possible and it just happens that two blocks claim to be number n in line. Simply two miners happen to find it at the same time, both blocks have a different set of transaction they confirm, both can be empty or full. Both are valid and reward the miner with (currently) 25 BTC. Each miner continues with the next block on top of their own block, the rest of the network on the block they learned about first. These two competing chains (called forks) will eventually result in a single winning chain, aka the longest chain with the most work done. Most work done is important in this context due to possible difficulty changes. So just "more blocks" is not enough.

It is however incredible expensive to reverse 2600 blocks, as you would have to do all the work (via hashing power) to find 2600 new blocks that are still valid, but use your replacement block as a reference 2599 blocks deep. Keep in mind that the rest of the world will continue to build on the 2600 blocks while you try to exchange them. Only when you replaced all of those block and superseded the rest of the world will your chain be longer and the valid one.

[Jet Cash]

So what happens to the blocks in the shorter fork? (and the transactions in those blocks)

[shorena]

So what happens to the blocks in the shorter fork? (and the transactions in those blocks)

The blocks are considered orphans and will be forgotten. If your version of bitcoin core was online durring such an event it keeps them AFAIK. The transactions that are not in other blocks are again unconfirmed and usually must be confirmed again by miners or resend by clients. Its more common that transactions are confirmed in both chains.

[Jet Cash]

So what happens to the Bitcoins that have been awarded to the miners in the short fork?

[shorena]

So what happens to the Bitcoins that have been awarded to the miners in the short fork?

They no longer exist, the reward went to another miner. Newly mined coins are considered "immature" for 120 blocks to avoid that they are used for payments that could become nil.

[Jet Cash]

I knew I didn't want to be a miner.