1. What is Bitcoin?
Just like the money you usually spend, but it's all online, invisible, and intangible. You store money in your own Bitcoin 'account' (we call it a wallet), and when transferring, you send it from your wallet to someone else's wallet.
2. Without banks, who keeps the accounts?
Banks don’t manage it, everyone keeps accounts!
• Computers around the world (called nodes) work together to maintain a 'ledger', recording where everyone's money is spent.
• Anyone can join as a 'ledger administrator' (commonly known as a miner).
• Each transaction information will be broadcast to the whole world, and these computers will rush to help keep accounts.
3. How to keep accounts?
Suppose you want to transfer 1 bitcoin to a friend:
1. You use wallet software to fill in the recipient's 'address' (like an account number) and the amount.
2. Transactions will be packaged into data and broadcast to the miners.
3. Miners check if there is enough money in the ledger and verify you are the actual initiator.
• For example: If you claim you have 1 bitcoin, miners will check the ledger to confirm you really have it.
4. Once the transaction is confirmed to be correct, miners rush to record this transaction in a new page of the 'ledger' (called a block).
4. Why are miners eager to record accounts?
To make money! Whoever grabs the right to record will receive a portion of 'newly minted' bitcoins as a reward, this is called mining.
• The total amount of Bitcoin is fixed (21 million coins), but it hasn't all been mined yet, what you grab is the reward.
• But don't worry, miners earn reward money, which has nothing to do with your penny.
5. How to grab the right to record accounts?
Miners have to solve a super difficult math problem with their computers, whoever solves it the fastest wins.
• This problem is specifically designed to 'waste resources', aiming to make accounting fair, because everyone has to put in effort.
• The winning miner can 'stamp' the ledger—confirming the transaction is officially completed, and receive bitcoin as a reward.
6. Where does the ledger go after accounting?
Every time a page of accounts (a block) is recorded, it will be added to the ledger (blockchain).
• All computers will save the same copy of the ledger, public and transparent, and no one can change it.
• For example, after you transfer 1 bitcoin to a friend, it will forever be recorded on the blockchain that 'you transferred 1 coin to him'.
7. Why is it secure?
• Decentralized: The ledger is not stored in a bank, people around the world have backups, and you cannot delete or tamper with the ledger.
• Signature verification: Only by signing with your 'private password' (private key) can you spend your money; others stealing your wallet address won't work.
• Transparency: Who transferred how much money to whom, this information is public on the blockchain, no fear of forgery.
8. What are the benefits of transferring money with Bitcoin?
1. No need for banks: You can transfer whenever you want, without queuing or looking at the bank's face.
2. Low transaction fees: Especially for cross-border transfers, it is much cheaper than banks.
3. Public and transparent: No one can steal your ledger, nor can anyone record more money than they actually have.
Bitcoin is a system where everyone keeps accounts and competes for rewards!
• Miners maintain the network, ensuring no one cheats, making transactions transparent.
• You send and receive bitcoins through a wallet, safe and reliable, no one can change your accounts.
If Bitcoin is likened to a village 'ledger', it is that ledger without a village head, where everyone has acted as the village secretary, everyone keeps an eye on the accounts and records, a fair and transparent 'new type of ledger system'.