How does Bitcoin work?

Bitcoin is a decentralized digital currency that is powered by a distributed ledger technology called blockchain.

Bitcoin works by allowing users to send and receive payments over the internet without the need for a central authority or bank. The Bitcoin network is made up of nodes, which are computers that run the Bitcoin software. These nodes form a peer-to-peer network, meaning that they can communicate with each other directly without relying on any third party.

All transactions on the Bitcoin network are recorded in a public ledger called the blockchain. The blockchain is maintained by miners, who use specialized hardware to solve complex mathematical problems in order to verify transactions and add them to the blockchain. When someone sends a payment using Bitcoin, their transaction is broadcast to all of the nodes on the network.

The miners then compete to solve complex mathematical problems in order to verify the transaction and add it to the blockchain. Once verified, the transaction is added to the blockchain and can’t be reversed or tampered with. This ensures that all transactions are secure and immutable.

In addition to verifying transactions, miners also receive rewards for their work in the form of newly created bitcoins. This process of creating new bitcoins is known as mining and it serves as an incentive for miners to continue verifying transactions on the network. As more people use Bitcoin, more miners join the network and more computing power is needed to process transactions, which leads to an increase in mining rewards over time.