How Does Bitcoin Work ? (The Basics) – Beginners Guide To Bitcoin – How To Get Started With Bitcoin

How does Bitcoin work?
This is a question that often causes confusion.
Here’s a quick explanation!
The basics for a new user
As a new user, you can get started with Bitcoin
without understanding the technical details.
Once you have installed a Bitcoin wallet on
your computer or mobile phone, it will generate
your 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.
In 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 shared public ledger
on which the entire Bitcoin network relies.
All confirmed transactions are included in
the block chain.
This way, Bitcoin wallets can calculate their
spendable balance and new transactions can
be verified to be spending bitcoins that are
actually owned 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 between
Bitcoin wallets that gets included in the
block chain.
Bitcoin wallets keep a secret piece of data
called a private key or seed, which is used
to sign transactions, providing a mathematical
proof that they have come from the owner of
the wallet.
The signature also prevents the transaction
from being altered by anybody once it has
been issued.
All transactions are broadcast between users
and usually begin to be confirmed by the network
in the following 10 minutes, through a process
called mining.
Processing – mining
Mining is a distributed consensus system that
is used to confirm waiting transactions by
including them in the block chain.
It enforces a chronological order in the block
chain, protects the neutrality of the network,
and allows different computers to agree on
the state of the system.
To be confirmed, transactions must be packed
in a block that fits very strict cryptographic
rules that will be verified by the network.
These rules prevent previous blocks from being
modified because doing so would invalidate
all following blocks.
Mining also creates the equivalent of a competitive
lottery that prevents any individual from
easily adding new blocks consecutively in
the block chain.
This way, no individuals can control what
is included in the block chain or replace
parts of the block chain to roll back their
own spends.
Going down the rabbit hole
This is only a very short 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 design, read the developer documentation,
and explore the Bitcoin wiki.

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