Bitcoin is a decentralised digital currency that allows peer-to-peer transactions without the need for intermediaries like banks or other financial institutions. It is based on a revolutionary technology called the blockchain, which allows for secure, transparent and tamper-proof transactions.
Here’s how Bitcoin works:
Transactions: When a user wants to send Bitcoin to someone else, they create a transaction. A transaction contains the recipient’s Bitcoin address, the amount to be sent, and a unique signature generated using the sender’s private key.
Verification: The transaction is then broadcast to the Bitcoin network, where it is verified by a network of computers called nodes. These nodes use complex mathematical algorithms to ensure that the transaction is legitimate and that the sender has enough Bitcoin to make the payment.
Mining: Once the transaction is verified, it is added to a new block of transactions, which is then added to the existing blockchain. This process is known as mining, and it is carried out by specialised computers that compete to solve a complex mathematical puzzle. The first computer to solve the puzzle gets to add the new block to the blockchain and is rewarded with a certain amount of new Bitcoin.
Blockchain: The blockchain is a public ledger that contains a record of all Bitcoin transactions. Each block in the blockchain contains a unique code called a hash, which is generated by combining the contents of the block with the hash of the previous block in the chain. This creates an unbreakable chain of blocks that cannot be altered without invalidating the entire blockchain.
Wallets: Bitcoin is stored in digital wallets, which can be accessed using private keys. These wallets can be stored on a computer or a mobile device, or they can be kept offline for added security.
Overall, Bitcoin provides a decentralised, secure, and transparent way for people to transact without the need for intermediaries. Its underlying blockchain technology has the potential to revolutionise many industries beyond just finance.