Bitcoin is a digital currency and a peer-to-peer payment network. Introduced in 2009 under the name Satoshi Nakamoto, it operates without a central bank. Its open-source software lets participants independently check the network’s rules.[1]
How the network works
The blockchain is a shared public record of confirmed transactions. A transaction uses a digital signature to authorize a transfer. Nodes verify transactions and blocks against the rules they enforce.[2]
Mining uses proof of work to propose new blocks and establish their order. Miners compete using computation, while other participants verify the result. Mining and verification have different roles: producing a block does not make an invalid transaction acceptable.[1, 2]
Verification matters more than trust
Bitcoin nodes independently check signatures, spending rules, and the validity of each block. Mining proposes an order for transactions, but verification is what prevents an invalid transaction from becoming acceptable.
Supply and units
Under the current protocol, total issuance is limited to 21 million bitcoin. New issuance decreases over time through halvings. A bitcoin divides into 100 million satoshis, so people can hold or transfer fractions of a coin.[1]
A limited supply does not guarantee a particular price. Bitcoin’s market value fluctuates, and holding it can result in substantial losses.[1]
Wallets and ownership
A wallet manages the keys used to sign transactions; the transaction record remains on the blockchain. Control of the relevant private keys enables spending. Backups and careful key handling therefore matter as much as the wallet interface.[2]
Continue with how cryptocurrency wallets work and wallet security basics.
Ownership means control of keys
A wallet does not hold coins like a physical container. It manages the private keys that authorize spending of transaction outputs recorded on the blockchain, which is why backups and careful key handling are essential.
References
- Bitcoin.org — Frequently asked questions. Origins, verification, issuance, units, and volatility.
- Bitcoin.org — How does Bitcoin work? Blockchain, signatures, and mining.
Educational information, not investment advice.