Bitcoin (BTC) is a decentralized digital currency that uses cryptography to secure and verify transactions. Here's a simplified explanation of how it works:
1. Decentralized network: Bitcoin operates on a peer-to-peer network of computers (nodes) that verify and record transactions on a public ledger called the blockchain.
2. Mining: New bitcoins are created through a process called mining, where nodes solve complex mathematical problems to validate transactions and add them to the blockchain.
3. Transactions: When a user initiates a transaction, it is broadcast to the network, where it is verified by nodes and added to a batch of transactions called a block.
4. Blockchain: The blockchain is a chain of blocks, each containing a list of transactions. It is maintained by the nodes on the network, ensuring the integrity and immutability of the transactions.
5. Private keys: Each bitcoin is associated with a unique private key, which is used to sign transactions and prove ownership.
6. Wallets: Users store their bitcoins in digital wallets, which can be accessed through software or hardware.
7. Cryptography: Bitcoin uses advanced cryptography, including elliptic curve cryptography and hash functions, to secure transactions and control the creation of new units.
8. Supply: The total supply of bitcoin is capped at 21 million, preventing inflation and maintaining the value of each coin.
This decentralized system allows for secure, transparent, and censorship-resistant financial transactions without the need for intermediaries like banks.
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