diff --git a/requirements.txt b/requirements.txt
new file mode 100644
index 00000000..0417a3df
--- /dev/null
+++ b/requirements.txt
@@ -0,0 +1,3 @@
+ecdsa==0.19.0
+pycryptodome==3.20.0
+sha3==0.2.1
\ No newline at end of file
diff --git a/run.sh b/run.sh
index 721aeb29..6881eb31 100644
--- a/run.sh
+++ b/run.sh
@@ -1 +1,7 @@
-# Update this file to run your own code
\ No newline at end of file
+#!/bin/bash
+
+python3 -m venv venv
+venv/bin/pip install --upgrade pip
+venv/bin/pip install -r requirements.txt
+source venv/bin/activate
+python3 src/main.py --mempool=mempool > output.txt
\ No newline at end of file
diff --git a/src/coinbase_transaction.py b/src/coinbase_transaction.py
new file mode 100644
index 00000000..af2a18cb
--- /dev/null
+++ b/src/coinbase_transaction.py
@@ -0,0 +1,31 @@
+COINBASE_TRANSACTION = {
+    "version": 2,
+    "locktime": 0xffffffff,
+    "vin": [
+        {
+        "txid": "0000000000000000000000000000000000000000000000000000000000000000",
+        "vout": 0xffffffff,
+        "sequence": 0xffffffff,
+        "is_coinbase": True,
+        "scriptsig": "160014fd91039e25b0827748473fce351afd8ead4ecdce",
+        "scriptsig_asm": "OP_PUSHBYTES_22 0014fd91039e25b0827748473fce351afd8ead4ecdce",
+        "witness": [
+            "0000000000000000000000000000000000000000000000000000000000000000",
+        ]
+        }
+    ],
+    "vout": [        
+        {
+            "scriptpubkey": "0014ad4cc1cc859c57477bf90d0f944360d90a3998bf",
+            "scriptpubkey_asm": "OP_0 OP_PUSHBYTES_20 ad4cc1cc859c57477bf90d0f944360d90a3998bf",
+            "scriptpubkey_type": "v0_p2wpkh",
+            "scriptpubkey_address": "bc1q44xvrny9n3t5w7lep58egsmqmy9rnx9lt6u0tc",
+            "value": 100000
+        },
+        {
+            "scriptpubkey": "",
+            "scriptpubkey_type": "op_return",
+            "value": 0
+        }
+    ]
+    }
\ No newline at end of file
diff --git a/src/constants.py b/src/constants.py
new file mode 100644
index 00000000..53681043
--- /dev/null
+++ b/src/constants.py
@@ -0,0 +1 @@
+TARGET = "0000ffff00000000000000000000000000000000000000000000000000000000"
diff --git a/src/main.py b/src/main.py
new file mode 100644
index 00000000..2757ec98
--- /dev/null
+++ b/src/main.py
@@ -0,0 +1,39 @@
+import argparse
+
+from src.coinbase_transaction import COINBASE_TRANSACTION
+from src.mempool import MemPool
+from src.mining import calculate_witness_commitment, block_mining
+from src.transaction import calculate_txid
+
+def parse_arguments():
+    parser = argparse.ArgumentParser(description='Simulation of the mining process of a block')
+    parser.add_argument('--mempool', type=str, required=True, help='Path to the directory containing the JSON files with transactions.')
+    return parser.parse_args()
+
+if __name__ == '__main__':
+    args = parse_arguments()
+
+    if args.mempool is None:
+        # TODO error
+        pass
+
+    mempool = MemPool(args.mempool)
+
+    block_transactions = [COINBASE_TRANSACTION] + mempool.valid_transactions
+    
+    transaction_hashes = [calculate_txid(COINBASE_TRANSACTION)] + [calculate_txid(json_transaction) for json_transaction in block_transactions[1:]]
+    block_hash = block_mining(transaction_hashes).hex()
+
+    wtxids =  ["0000000000000000000000000000000000000000000000000000000000000000"] + transaction_hashes[1:]
+
+    witness_commitment = calculate_witness_commitment(wtxids)    
+    scriptpubkey_wc = '6a24aa21a9ed' + witness_commitment
+
+    COINBASE_TRANSACTION["vout"][1]["scriptpubkey"] = scriptpubkey_wc
+
+    coinbase_serialized = serialize_transaction(COINBASE_TRANSACTION, segwit=True)
+
+    print(block_hash)
+    print(coinbase_serialized.hex())
+    for transaction in transaction_hashes:
+        print(transaction)
\ No newline at end of file
diff --git a/src/mempool.py b/src/mempool.py
new file mode 100644
index 00000000..070981d9
--- /dev/null
+++ b/src/mempool.py
@@ -0,0 +1,6 @@
+class MemPool:
+    def __init__(self, root_dir):
+        self.root_dir = root_dir
+        self.transaction_files = [os.path.join(self.root_dir, file) for file in os.listdir(self.root_dir) if file.endswith('.json')]
+        self.transactions = [Transaction(file) for file in self.transaction_files]
+        self.valid_transactions = [transaction.json_transaction for transaction in self.transactions if transaction.is_valid()]
diff --git a/src/mining.py b/src/mining.py
new file mode 100644
index 00000000..19ad30b4
--- /dev/null
+++ b/src/mining.py
@@ -0,0 +1,79 @@
+import hashlib
+import time
+
+from src.constants import TARGET
+
+def calculate_witness_commitment(wtxids):
+    merkle_root = calculate_merkle_root(wtxids)    
+    merkle_root_bytes = bytes.fromhex(merkle_root)
+    witness_reserved_value = '0000000000000000000000000000000000000000000000000000000000000000'
+    witness_reserved_value_bytes = bytes.fromhex(witness_reserved_value)    
+    return hashlib.sha256(hashlib.sha256(b''.join([merkle_root_bytes,witness_reserved_value_bytes])).digest()).hexdigest()
+
+def calculate_merkle_root(transactions):    
+    transaction_hashes = []
+    # reverse
+    for tx in transactions:
+        tx_bytes = bytes.fromhex(tx)
+        reversed_tx_bytes = tx_bytes[::-1]
+        transaction_hashes.append(reversed_tx_bytes.hex())
+
+    while len(transaction_hashes) > 1:
+        new_hashes = []
+
+        for i in range(0, len(transaction_hashes), 2):
+            if (i + 1 == len(transaction_hashes)):
+                new_hash = hashlib.sha256(hashlib.sha256(bytes.fromhex(transaction_hashes[i] + transaction_hashes[i])).digest()).hexdigest()
+            else:
+                new_hash = hashlib.sha256(hashlib.sha256(bytes.fromhex(transaction_hashes[i] + transaction_hashes[i + 1])).digest()).hexdigest()
+            new_hashes.append(new_hash)
+
+        transaction_hashes = new_hashes
+
+    return transaction_hashes[0]
+
+def is_valid_block_hash(block_hash, target):
+    if block_hash == "":
+        return False
+
+    return block_hash < target
+
+def calculate_bits(target_hex):
+    leading_zeros = len(target_hex) - len(target_hex.lstrip('0'))
+    exponent = (len(target_hex) - 1) // 2
+
+    coefficient_hex = target_hex[leading_zeros:].rstrip('0')
+    coefficient = int(coefficient_hex or '0', 16)
+
+    bits = (exponent << 24) + coefficient
+
+    return bits
+
+def block_mining(transaction_hashes, version=4):
+    # Calculate Merkle root hash of transactions
+    merkle_root_hashed = calculate_merkle_root(transaction_hashes)
+    prev_block_hash = "0000000000000000000000000000000000000000000000000000000000000000"
+    nonce = 0
+    bits = calculate_bits(TARGET)
+    timestamp = int(time.time())
+
+    block_hash = ""
+
+    block_header = []
+
+    while not is_valid_block_hash(block_hash, TARGET):
+        # Construct block header
+        block_header = []
+        block_header += [version.to_bytes(4, byteorder='little')]
+        block_header += [bytes.fromhex(prev_block_hash)[::-1]]
+        block_header += [bytes.fromhex(merkle_root_hashed)]
+        block_header += [timestamp.to_bytes(4, byteorder='little')]
+        block_header += [bits.to_bytes(4, byteorder='little')]
+        block_header += [nonce.to_bytes(4, byteorder='little')]
+
+        # Double sha256 and reverse
+        block_hash = hashlib.sha256(hashlib.sha256(b''.join(block_header)).digest()).digest()
+        block_hash = block_hash[::-1].hex()
+        nonce += 1
+
+    return b''.join(block_header)
diff --git a/src/serialize.py b/src/serialize.py
new file mode 100644
index 00000000..66005071
--- /dev/null
+++ b/src/serialize.py
@@ -0,0 +1,80 @@
+def serialize_input(tx_input, override=None):
+    serialized_input = []
+    serialized_input += [bytes.fromhex(tx_input["txid"])[::-1]]  # Reversed txid
+    serialized_input += [tx_input["vout"].to_bytes(4, byteorder="little")]
+
+    if override is None:
+        serialized_input += [serialize_script(bytes.fromhex(tx_input["scriptsig"]))]
+    elif override is True:
+        serialized_input += [serialize_script(bytes.fromhex(tx_input["prevout"]["scriptpubkey"]))]
+    elif override is False:
+        serialized_input += [serialize_script(bytes.fromhex(""))]
+
+    serialized_input += [tx_input["sequence"].to_bytes(4, byteorder="little")]
+
+    return b''.join(serialized_input)
+
+def encode_int(i, nbytes, encoding='little'):
+    return i.to_bytes(nbytes, encoding)
+
+def serialize_script(script):
+    return b''.join([encode_varint(len(script)), script])
+
+def serialize_output(output):
+    serialized_output = []
+
+    serialized_output += [output["value"].to_bytes(8, byteorder="little")]
+    serialized_output += [serialize_script(bytes.fromhex(output["scriptpubkey"]))]
+
+    return b''.join(serialized_output)
+
+def encode_varint(i):
+    if i < 0xfd:
+        return bytes([i])
+    elif i < 0x10000:
+        return b'\xfd' + i.to_bytes(2, 'little')
+    elif i < 0x100000000:
+        return b'\xfe' + i.to_bytes(4, 'little')
+    elif i < 0x10000000000000000:
+        return b'\xff' + i.to_bytes(8, 'little')
+    else:
+        raise ValueError("integer too large: %d" % (i, ))
+
+def serialize_transaction(transaction, index=-1, sighash_type=1, segwit=False):
+    # for now for p2pkh
+    message = []
+    message += [transaction["version"].to_bytes(4, byteorder="little")]
+
+    if segwit:
+        message += [b'\x00\x01'] # segwit marker
+
+    # inputs
+    message += [encode_varint(len(transaction["vin"]))]
+
+    inputs = transaction["vin"]
+    outputs = transaction["vout"]    
+
+    if index == -1:
+        message += [serialize_input(tx_in) for tx_in in inputs]
+    else:
+        message += [serialize_input(tx_in, index == i) for i, tx_in in enumerate(inputs)]
+
+    # outputs
+    message += [encode_varint(len(transaction["vout"]))]
+    message += [serialize_output(tx_out) for tx_out in outputs]
+
+    # witness
+    if segwit:
+        for tx_in in inputs:
+            message += [encode_varint(len(tx_in["witness"]))]
+
+            for item in tx_in["witness"]:
+                item_bytes = bytes.fromhex(item)
+                message += [encode_varint(len(item_bytes)), item_bytes]
+
+    # encode rest of data
+    message += [transaction["locktime"].to_bytes(4, byteorder="little")]
+    hash_type = 1
+    message += [hash_type.to_bytes(4, 'little') if index != -1 else b''] # 1 = SIGHASH_ALL
+
+    return b''.join(message)
diff --git a/src/transaction.py b/src/transaction.py
new file mode 100644
index 00000000..c270198a
--- /dev/null
+++ b/src/transaction.py
@@ -0,0 +1,72 @@
+import json
+
+from src.verify import valid_transaction_syntax, non_empty_vin_vout
+
+def calculate_txid(transaction_content, coinbase=False):
+    # Serialize the transaction content
+    if coinbase:
+        serialized_transaction = serialize_transaction(transaction_content, segwit=True) #json.dumps(transaction_content, sort_keys=True).encode()
+    else:
+        serialized_transaction = serialize_transaction(transaction_content) #json.dumps(transaction_content, sort_keys=True).encode()
+
+    # Calculate double SHA-256 hash
+    hash_result = hashlib.sha256(hashlib.sha256(serialized_transaction).digest()).digest()
+
+    # Reverse byte order to obtain txid
+    txid = hash_result[::-1].hex()
+    
+    return txid
+
+class Transaction:
+    def __init__(self, transaction_json_file):
+        # Parse transaction.
+        with open(transaction_json_file) as transaction:
+            json_transaction = json.load(transaction)
+        
+        # check jestli je valid
+        if valid_transaction_syntax(json_transaction):
+            self.transaction_name = get_filename_without_extension(transaction_json_file)
+            self.version = json_transaction['version']
+            self.locktime = json_transaction['locktime']
+            self.vin = json_transaction['vin']
+            self.vout = json_transaction['vout']
+            self.json_transaction = json_transaction
+        else:
+            print('Invalid transaction syntax')
+
+    def is_valid(self):
+        if not non_empty_vin_vout(self.vin, self.vout):
+            return False
+
+        input_sum = 0
+        for input in self.vin:
+            input_sum = input_sum + input['prevout']['value']
+
+        output_sum = 0
+        for output in self.vout:
+            output_sum = output_sum + output['value']
+
+        if input_sum < output_sum:
+            return False
+
+        input_idx = 0
+        for input in self.vin:
+            if 'scriptsig' in input:
+                scriptsig = input['scriptsig']
+
+                scriptpubkey_type = input['prevout']['scriptpubkey_type']
+
+                if scriptsig == "" or scriptpubkey_type not in ["p2pkh", "p2sh"]:
+                    return False
+                
+                if scriptpubkey_type == 'p2pkh':
+                    if not verify_p2pkh_transaction(input_idx, self.json_transaction):
+                        return False
+                else:
+                    return False
+            else:
+                return False
+            
+            input_idx += 1
+
+        return True
\ No newline at end of file
diff --git a/src/utils.py b/src/utils.py
new file mode 100644
index 00000000..32a854e0
--- /dev/null
+++ b/src/utils.py
@@ -0,0 +1,8 @@
+import os
+
+def get_filename_without_extension(file_path):
+    # Get the base filename from the path
+    filename = os.path.basename(file_path)
+    # Remove the extension
+    filename_without_extension = os.path.splitext(filename)[0]
+    return filename_without_extension
\ No newline at end of file
diff --git a/src/verify.py b/src/verify.py
new file mode 100644
index 00000000..7cb28a3f
--- /dev/null
+++ b/src/verify.py
@@ -0,0 +1,136 @@
+import ecdsa
+import hashlib
+
+from Crypto.Hash import RIPEMD160
+
+def valid_transaction_syntax(json_transaction):
+    required = ["version", "locktime", "vin", "vout"]
+
+    for field in required:
+        if field not in json_transaction:
+            print('Required field is missing')
+            return False
+        
+    if not isinstance(json_transaction["version"], int):
+        print('Invalid data type')
+        return False
+        
+    if not isinstance(json_transaction["locktime"], int):
+        print('Invalid data type')
+        return False
+
+    if not isinstance(json_transaction["vin"], list):
+        print('Invalid data type')
+        return False
+    
+    if not isinstance(json_transaction["vout"], list):
+        print('Invalid data type')
+        return False
+
+    # Check inputs
+    for input in json_transaction['vin']:
+        if not isinstance(input, dict):
+            print('Invalid data type')
+            return False
+
+        if 'txid' not in input or 'vout' not in input:
+            print('Invalid data type')
+            return False
+
+    # Check outputs
+
+    for output in json_transaction['vout']:
+        if not isinstance(output, dict):
+            print('Invalid data type')
+            return False
+
+        if 'scriptpubkey' not in output or 'value' not in output:
+            print('Invalid data type')
+            return False
+        
+    return True
+
+def non_empty_vin_vout(vin, vout):
+    # Make sure neither in or out lists are empty
+    if not vin:
+        print("vin is empty")
+        return False
+    if not vout:
+        print("vout is empty")
+        return False
+    
+    return True
+
+def parse_der_signature(der_signature_with_hash_type):
+    # Remove the hash_type from the DER signature
+    der_signature = der_signature_with_hash_type[:-2]
+    
+    # Parse the DER signature
+    der_bytes = bytes.fromhex(der_signature)
+    r_length = der_bytes[3]
+    r = int.from_bytes(der_bytes[4:4 + r_length], 'big')
+    s_length_index = 4 + r_length + 1
+    s_length = der_bytes[s_length_index]
+    s = int.from_bytes(der_bytes[s_length_index + 1:s_length_index + 1 + s_length], 'big')
+    hash_type = der_bytes[-1]
+    
+    return r, s, hash_type
+
+def verify_p2pkh_transaction(input_idx, json_transaction):
+    #################
+    # Pubkey script #
+    #################    
+    
+    input_tx = json_transaction["vin"][input_idx]
+
+    # Extract data from input transaction
+    script_sig_asm = input_tx["scriptsig_asm"]
+
+    # Parse scriptSig ASM to extract signature and public key
+    script_parts = script_sig_asm.split(" ")
+    signature_hex = script_parts[1]
+    public_key_hex = script_parts[3]
+
+    r, s, hash_type = parse_der_signature(signature_hex)
+
+    r_hex = hex(r)[2:]
+    s_hex = hex(s)[2:]
+
+    der_len = len(signature_hex[:-2])
+    signature_len = len(r_hex + s_hex) + 2 * 6
+    
+    if der_len != signature_len:        
+        return False
+    
+    signature = bytes.fromhex(r_hex + s_hex)
+
+    public_key = bytes.fromhex(public_key_hex)
+
+    scriptpubkey = bytes.fromhex(input_tx['prevout']['scriptpubkey'])
+    pubkey_hash = scriptpubkey[3:23]
+
+    hashed_public_key = hashlib.sha256(public_key).digest()
+
+    ripemd160 = RIPEMD160.new()
+    ripemd160.update(hashed_public_key)
+    pubkey_hash_calculated = ripemd160.digest()
+
+    if pubkey_hash != pubkey_hash_calculated:
+        return False
+
+
+    ####################
+    # Signature script #
+    ####################
+
+    data_signed = serialize_transaction(json_transaction, input_idx, int(hash_type))
+    data_hash = hashlib.sha256(data_signed).digest()
+
+    # Verify the signature
+    verifying_key = ecdsa.VerifyingKey.from_string(public_key, curve=ecdsa.SECP256k1)
+    try:
+        verifying_key.verify(signature, data_hash, hashlib.sha256)
+    except ecdsa.BadSignatureError:            
+        return False
+
+    return True