How does Bitcoin work?
This is a question that often causes confusion. Here’s a quick explanation!
The basics for a fresh user
Spil a fresh user, you can get commenced with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your laptop or mobile phone, it will generate your very first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. Te fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.
Balances – block chain
The block chain is a collective public ledger on which the entire Bitcoin network relies. All confirmed transactions are included te the block chain. This way, Bitcoin wallets can calculate their spendable balance and fresh transactions can be verified to be spending bitcoins that are actually possessed by the spender. The integrity and the chronological order of the block chain are enforced with cryptography.
Transactions – private keys
A transaction is a transfer of value inbetween Bitcoin wallets that gets included te the block chain. Bitcoin wallets keep a secret lump of gegevens called a private key or seed, which is used to sign transactions, providing a mathematical proof that they have come from the proprietor of the wallet. The signature also prevents the transaction from being altered by anybody once it has bot issued. All transactions are broadcast inbetween users and usually start to be confirmed by the network ter the following Ten minutes, through a process called mining.
Processing – mining
Mining is a distributed overeenstemming system that is used to confirm waiting transactions by including them ter the block chain. It enforces a chronological order te the block chain, protects the neutrality of the network, and permits different computers to agree on the state of the system. To be confirmed, transactions voorwaarde be packed te a block that fits very rigorous cryptographic rules that will be verified by the network. Thesis rules prevent previous blocks from being modified because doing so would invalidate all following blocks. Mining also creates the omschrijving of a competitive lottery that prevents any individual from lightly adding fresh blocks consecutively ter the block chain. This way, no individuals can control what is included ter the block chain or substitute parts of the block chain to roll back their own spends.
Going down the rabbit crevice
This is only a very brief and concise summary of the system. If you want to get into the details, you can read the original paper that describes the system’s vormgeving, read the developer documentation, and explore the Bitcoin wiki.