How Does Bitcoin Work?
Bitcoin is a decentralized digital currency that operates on a technology called blockchain. Unlike traditional currencies, Bitcoin is not issued by any government or central bank. Instead, it relies on a peer-to-peer network to validate and record transactions.
Blockchain Technology: The Bitcoin network is maintained by a public ledger known as the blockchain. This ledger contains all Bitcoin transactions ever made and is updated continuously. Each block in the chain contains a group of transactions, and once a block is filled, it is added to the existing chain in a linear, chronological order.
Mining: New Bitcoins are created through a process called mining, which involves solving complex mathematical problems. Miners use powerful computers to compete for the right to add the next block to the blockchain. Successfully adding a block rewards the miner with newly minted Bitcoins and transaction fees.
Decentralization: Bitcoin operates in a decentralized manner, meaning no single entity controls it. This decentralization is key to its security, making it difficult for hackers to manipulate the network. Each node in the network maintains a copy of the blockchain, ensuring transparency and trust among users.
Transactions: When a user wants to send Bitcoin, they create a transaction that is broadcast to the network. Miners then verify and validate the transaction. Once confirmed, it is added to the blockchain, making it irreversible and publicly visible.
Overall, Bitcoin functions as a digital currency through a combination of blockchain technology, mining, and decentralization, providing a secure and transparent financial ecosystem.