Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. It uses cryptography to secure and verify transactions as well as to control the creation of new units of a particular cryptocurrency.
Here’s a basic overview of how it works:
- Transactions: When someone wants to send bitcoins to another user, they broadcast a transaction to the network which includes the details of the sender, recipient, and amount being sent.
- Mining: Transactions are grouped together into blocks and verified by special nodes on the network called “miners.” Miners solve complex mathematical problems to validate transactions and add the block to the existing blockchain.
- Blockchain: The blockchain is a public ledger of all confirmed transactions, maintained by a decentralized network of nodes. Each block in the blockchain contains a list of transactions and a reference to the previous block. This creates a secure and permanent record of all transactions. In fact, the Bitcoin Blockchain contains a record of every transaction ever made in Bitcoin’s history!
- Confirmations: Once a transaction is added to the blockchain, it is considered confirmed. The more confirmations a transaction has, the more secure it is considered.
- Wallet: To use bitcoin, you need a digital wallet which can be software or hardware-based. The wallet stores your public and private keys, allowing you to receive and send bitcoins.
This is a basic overview of how Bitcoin works, and of course there are a lot of interesting and complex facets related to how Bitcoin works. If you’d like to learn more, there are many resources available online including articles, videos, and forums where you can ask questions and learn from others in the community. Feel free to email us as well! Scroll down to contact Coinstream.