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Bitcoin

How does bitcoin work eli5?

Bitcoin is a digital currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. It is decentralized, meaning that it is not controlled by a central authority like a bank or government. Instead, it is based on a peer-to-peer network, where all transactions are verified by a network of users.So,…

Bitcoin is a digital currency that was created in 2009 by an unknown person using the alias Satoshi Nakamoto. It is decentralized, meaning that it is not controlled by a central authority like a bank or government. Instead, it is based on a peer-to-peer network, where all transactions are verified by a network of users.

So, how does Bitcoin work? Let’s break it down in simple terms:

1. Bitcoin transactions are recorded on a public ledger called the blockchain. The blockchain is a distributed ledger, which means that it is maintained by a network of computers around the world. Each block in the chain contains a record of several transactions, along with a unique code called a hash.

2. To make a Bitcoin transaction, you need a digital wallet. This is a software program that allows you to send and receive Bitcoins. Each wallet has a unique address, which is like a bank account number. When you send Bitcoins to someone else, you are essentially transferring ownership of a certain amount of Bitcoins from your wallet to theirs.

3. When you make a transaction, it is broadcast to the network of computers. The computers, known as nodes, verify the transaction and add it to the blockchain. This process is called mining. In order to mine a block, nodes have to solve complex mathematical equations. The first node to solve the equation gets to add the block to the blockchain and is rewarded with a certain amount of Bitcoins. This process ensures that the blockchain is secure and that transactions cannot be tampered with.

4. Once a transaction is added to the blockchain, it cannot be reversed. This is because the blockchain is a decentralized ledger, which means that there is no central authority that can alter or delete transactions. This makes Bitcoin transactions irreversible and secure.

5. The value of Bitcoin is determined by supply and demand. There are a limited number of Bitcoins in circulation, and the demand for them can vary depending on a variety of factors, such as economic conditions and investor sentiment. This can cause the value of Bitcoin to fluctuate wildly, sometimes within a matter of hours.

In conclusion, Bitcoin is a decentralized digital currency that is based on a peer-to-peer network. Transactions are recorded on a public ledger called the blockchain, which is maintained by a network of computers around the world. Transactions are verified by nodes, and once they are added to the blockchain, they cannot be reversed. The value of Bitcoin is determined by supply and demand and can fluctuate wildly.

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