1. What is Bitcoin?
Just like the money you usually spend, but it’s all online, invisible, and intangible. You store money in your Bitcoin 'account' (which we call a wallet), and when transferring, you send it from your wallet to someone else's wallet.
2. Without banks, who keeps the accounts?
The banks don't manage it, everyone keeps the accounts!
• Computers around the world (called nodes) work together to maintain a 'ledger' that records where everyone's money is spent.
• Anyone can join and become a 'ledger administrator' (commonly known as a miner).
• Each transaction information will be broadcast worldwide, and these computers will compete to help keep accounts.
3. How to keep accounts?
Assuming you want to transfer 1 Bitcoin to a friend:
1. You use wallet software to fill in the other party's 'address' (like an account number) and amount.
2. Transactions will be packaged into data and broadcast to miners.
3. Miners check if there is enough money on the ledger and verify that you are indeed the initiator.
• For example: You claim to have 1 Bitcoin; miners check the ledger to confirm you actually 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 keep accounts?
To make money! Whoever grabs the right to record transactions can receive a portion of the 'newborn' Bitcoins as a reward, which is called mining.
• The total amount of Bitcoins is fixed (21 million), but it's not all mined yet; what you grab is the reward.
• But rest assured, miners earn rewards, which have nothing to do with your money.
5. How to grab the right to keep accounts?
Miners rely on computers to solve an extremely difficult math problem; whoever solves it the fastest wins.
• This problem is specially designed to 'waste resources'; the aim is to make accounting fair, as everyone has to put in effort.
• The winning miners can 'stamp' the ledger—confirming that the transaction is officially completed and receive Bitcoin as a reward.
6. Where does the ledger go after it's recorded?
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 modify it.
• For example, after you transfer 1 Bitcoin to a friend, the blockchain will forever record 'you transferred 1 coin to him'.
7. Why is it secure?
• Decentralized: The ledger is not stored in a bank; everyone in the world has a backup, and you cannot delete or tamper with the ledger.
• Signature verification: Only by signing with your 'private key' can you spend your money; others stealing the wallet address is useless.
• Transparency: Who transferred how much money to whom, this information is publicly available on the blockchain, so there’s no fear of forgery.
8. What are the benefits of using Bitcoin for transfers?
1. No banks: You can transfer whenever you want, no queues and no need to consider the banks' opinions.
2. Low fees: Especially for cross-border transfers, much cheaper than banks.
3. Public and transparent: No one can steal your ledger, and no one can record more money than they have.
Bitcoin is a system where everyone keeps accounts and competes for rewards!
• Miners maintain the network, ensuring no one cheats, and all transactions are transparent.
• You send and receive Bitcoin through a wallet, safe and reliable, and no one can alter your accounts.
If we liken Bitcoin to the 'ledger' of a village, it is one that has no village chief, but everyone has acted as the village secretary, watching over the accounts together, recording transactions in a fair and transparent 'new ledger system'.