Bitcoin – The Basics

As a new user, you can get started with Bitcoin without understanding the technical details. As soon as you have installed a wallet on your computer or smartphone, it generates your first Bitcoin address and you can create more as soon as you need them. You can share your Bitcoin addresses with your friends so that they can send money to you, or vice versa. In fact, this is similar to how email works, except that Bitcoin addresses should only be used once.

Sending Payments

Account balances – blockchain

The blockchain is a shared public booking system on which the entire Bitcoin network is based. All confirmed transactions are stored in the blockchain. In this way, Bitcoin wallets can calculate the account balance and new transactions can only be carried out if the Bitcoins actually belong to the sender. The integrity and the chronological order of the blockchain are ensured by cryptography.

Sending Payments

Transactions – private keys

A transaction is the transfer of an amount between Bitcoin wallets that is entered in the blockchain. Bitcoin wallets contain a secret block of data called a private key or „seed“. It is used to sign transactions, which provides mathematical proof that they came from the owner of the wallet. The signature also prevents transactions from being modified by anyone after they have been sent. All transactions are propagated over the network and within 10-20 minutes the network will begin confirming them using a process called mining.

Processing and the power behind

Processing – mining

Mining is a distributed consensus system that is used to confirm pending transactions by adding them to the blockchain. Mining enforces a chronological order of the blockchain, protects the neutrality of the network and ensures that the various computers agree on the status of the system. In order to be confirmed, transactions must be placed in a block. This must meet very strict cryptographic rules that are verified by the network. These rules prevent previous blocks from being modified, since a change would invalidate all subsequent blocks. Mining is also a kind of lottery with strong competition that prevents anyone from simply adding new consecutive blocks to the blockchain. In this way, nobody can control what is added to the blockchain or modify parts of the blockchain in such a way that their own expenses are reversed.

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