Basics
How Bitcoin works
Short answer
Bitcoin is a decentralized digital payment network that uses cryptography to secure transactions. Users send and receive value through wallets, transactions are recorded on a shared public ledger called the blockchain, and mining confirms pending transactions by following strict cryptographic rules.
What is Bitcoin
Bitcoin is a consensus network that enables a digital payment system and completely digital money. It is the first decentralized peer-to-peer payment network powered by its users with no central authority or middlemen. From a user perspective, Bitcoin works like cash for the internet.
Sources: bitcoin.org
How wallets and addresses work
A Bitcoin wallet is a software application that stores your bitcoins and allows you to send and receive them. When you install a wallet on your computer or mobile phone, it generates Bitcoin addresses you can use to receive payments. You can disclose your addresses to friends so they can pay you. Bitcoin addresses should be used only once, similar to how email works but with added privacy.
Sources: bitcoin.org
The blockchain and transactions
The blockchain is a shared public ledger that records all confirmed transactions. It allows wallets to calculate their spendable balance and lets the network verify that the sender is authorized to spend coins. Each transaction is a transfer of value between wallets and gets recorded permanently in the blockchain.
Sources: bitcoin.org
Bitcoin wallets keep a secret piece of data called a private key, which is used to sign transactions. This provides mathematical proof that the transaction came from the wallet owner. The signature also prevents the transaction from being altered after it is issued.
Sources: bitcoin.org
Mining and confirmation
Mining is a distributed consensus system that confirms pending transactions by including them in the blockchain. All transactions are broadcast to the network and usually receive their first confirmation within about 10 to 60 minutes through mining. To be confirmed, transactions must be packed into a block that follows strict cryptographic rules verified by the network.
Sources: bitcoin.org
Mining works like a competitive lottery that makes it difficult for any single participant to keep adding new blocks one after another. This prevents any group or individual from controlling what goes into the blockchain or rewriting past transactions to reverse their own spending.
Sources: bitcoin.org
How Bitcoin is controlled
Nobody owns the Bitcoin network much like no one owns the technology behind email. Bitcoin is controlled by all Bitcoin users around the world. While developers improve the software, they cannot force changes to the Bitcoin protocol because all users are free to choose what software they use.
Sources: bitcoin.org
Changes to Bitcoin are proposed publicly, often as Bitcoin Improvement Proposals, reviewed by developers, and only take effect if users, miners, and node operators voluntarily adopt them. Because the network requires broad consensus, changes that users do not accept simply do not happen.
Sources: bitcoin.org
Security and trust
The integrity and chronological order of the blockchain are protected by cryptography. All transactions and bitcoins issued into existence can be transparently consulted in real-time by anyone. All payments can be made without reliance on a third party and the whole system is protected by heavily peer-reviewed cryptographic algorithms like those used for online banking.
Sources: bitcoin.org bitcoin.org
Official sources used on this page
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Questions
How do I get started with Bitcoin?
Install a Bitcoin wallet application on your computer or mobile phone. The wallet will generate your first Bitcoin address. You can create more addresses whenever you need them. Share your address with people who want to send you bitcoin, and use their address to send bitcoin to them.
Sources: bitcoin.org
What is a private key?
A private key is a secret piece of data stored in your Bitcoin wallet. It is used to sign transactions and provide mathematical proof that the transaction came from you. The signature prevents your transaction from being altered after you issue it. Never share your private key with anyone.
Sources: bitcoin.org
Who created Bitcoin?
The first Bitcoin specification and proof of concept was published in 2009 by Satoshi Nakamoto. Satoshi left the project in late 2010 without revealing much about himself. The Bitcoin community has since grown significantly with many developers working on the project. The identity of Bitcoin's inventor is not essential to how Bitcoin works today.
Sources: bitcoin.org
How long does a Bitcoin transaction take?
All transactions are broadcast to the network and usually receive their first confirmation within about 10 to 60 minutes through the mining process.
Sources: bitcoin.org