Bitcoin is a decentralized digital currency that uses cryptography to secure transactions and control the creation of new units. Transactions are recorded on a public ledger called a blockchain, which allows for transparent verification of the transaction history.
Individuals can send and receive bitcoins, which are stored in a digital wallet, without the need for intermediaries such as banks. The scarcity of bitcoins is maintained by a protocol rule that limits the total number that will ever be created to 21 million.
Miners play a crucial role in the Bitcoin network by confirming transactions and adding them to the blockchain. In exchange, they receive newly created bitcoins as a reward and transaction fees paid by users.
Overall, the combination of cryptography, decentralized networks, and a transparent ledger provides a secure and efficient way to transfer value over the internet, without the need for intermediaries.
Bitcoin operates on a decentralized peer-to-peer network, where users can make transactions directly with each other, without the need for intermediaries like banks or other financial institutions. This allows for faster, cheaper, and more secure transactions compared to traditional financial systems.
In a Bitcoin transaction, the buyer and seller agree on the terms of the transaction and the transfer of ownership of the bitcoins takes place. This transaction is broadcast to the network and verified by nodes called "miners". Miners use computing power to validate the transaction, add it to the blockchain, and receive a small fee for their effort.
The blockchain is a public ledger of all confirmed transactions that is maintained by a decentralized network of computers. This decentralized structure makes the system resistant to censorship, fraud, and hacking.
Another key aspect of Bitcoin is its limited supply. The total number of bitcoins that will ever be created is capped at 21 million. This scarcity is designed to ensure that the value of Bitcoin remains stable over time, and also provides a way to protect against inflation.
Overall, Bitcoin offers a new way to think about money, as it operates on a decentralized network, uses cryptography for security, and has a limited supply.