How Bitcoin Works
Bitcoin operates on a peer-to-peer network, meaning users can send and receive payments directly without the need for a third party. Bitcoin transactions are initiated by users' private keys, which are cryptographic codes that verify ownership. When a transaction is made, it is broadcast to the Bitcoin network, where miners verify it. Once confirmed, the transaction is added to the blockchain, making it irreversible.
Bitcoin's Supply and Scarcity
One of the key aspects of Bitcoin is its fixed supply. Unlike traditional currencies, which can be printed in unlimited quantities by central banks, Bitcoin has a hard cap of 21 million coins. This scarcity is built into the protocol to ensure that the value of Bitcoin is not diluted over time, similar to precious metals like gold. The limited supply, combined with increasing demand, has contributed to Bitcoin's price volatility and long-term growth potential.
