Bitcoin is a digital currency (cryptocurrency) that operates without a central authority, allowing direct transactions between users over the internet[1]. Instead of relying on banks, Bitcoin uses cryptographic technology and a public ledger called the blockchain to record every transaction securely and transparently[1].
To understand how Bitcoin works, imagine sending digital money instead of paper cash. When you want to send Bitcoin:
- You use a wallet to store your Bitcoin, which gives you a public key (your address for receiving Bitcoin) and a private key (your secret password for spending Bitcoin)[1].
- To create a transaction, you enter the recipient’s wallet address and the amount of Bitcoin[1].
- You use your private key to sign the transaction, proving it’s really you sending the Bitcoin[2].
- The signed transaction is sent to the Bitcoin network, where it is verified by other users called miners[1].
- Miners bundle transactions into blocks and solve complex computer puzzles to add these blocks to the blockchain. This process is called mining[1].
- Once your transaction is included on the blockchain, it’s permanently recorded and confirmed — making it impossible to undo or alter[3].
The blockchain works like a global spreadsheet that anyone can inspect but no one can change once records are added. Each block references the previous block and uses cryptography to prevent tampering[1]. The decentralized system means no single entity controls Bitcoin, enhancing security, transparency, and accessibility for anyone with internet access[1].
Unlike traditional payment systems, Bitcoin offers a degree of privacy because you use addresses generated by your wallet rather than your real identity[3]. However, every transaction is publicly recorded, making the network auditable and transparent[3].
To use Bitcoin, all you need is:
- A crypto wallet (software or hardware) to store, send, and receive Bitcoin[1].
- Your wallet will generate a public address for receiving Bitcoin and a private key for making transactions. Keep your private key secret to keep your Bitcoin safe[2].
- You can buy, sell, or trade Bitcoin through online exchanges using regular money or other cryptocurrencies[1].
- Internet access is essential for all Bitcoin activities[1].
In summary: Bitcoin lets you send and receive value digitally, securely, and independently of banks or governments, using cryptography, blockchain technology, and a decentralized network of users and miners[1][2].