What Is Bitcoin and How Does It Work

Key Takeaways.

  • Bitcoin is the first cryptocurrency ever created, launched in 2009.

  • It uses a public technology called blockchain to record every transaction.

  • Bitcoin is decentralized, meaning no bank or government controls it.

  • People can use Bitcoin to send, receive, and store digital money.

    What Is Bitcoin?

  • Bitcoin is digital money. Just like cash, you can send it to someone, receive it, or use it to buy things—but it's 100% online.

  • It was introduced in 2008 by a mysterious person (or group) named Satoshi Nakamoto. In 2009, the Bitcoin software went live.

  • Unlike regular money (like rupees, dollars, or euros), Bitcoin is not controlled by any bank or government. It runs on a system where people deal directly with each other—no need for a middleman.

    How Does Bitcoin Work?

  • Bitcoin runs on something called blockchain technology.

  • Think of blockchain as a public diary. Every time someone sends or receives Bitcoin, that transaction is written down in this diary—and everyone in the world can see it.

  • Each page of this diary is called a “block”, and all the pages together form a “chain”—that’s the blockchain.

  • So, when Alice sends 1 BTC to Bob, this transaction is added to the blockchain. It’s public, secure, and can’t be changed.

    Why Is Bitcoin Special?

  • Decentralized: No one person or group controls Bitcoin.

  • Transparent: Every transaction is recorded and visible to everyone.

  • Secure: It's protected by strong cryptography.

  • Unchangeable: Once written in the blockchain, no one can delete or change it.

    What Is Bitcoin Mining?

  • Mining is how new Bitcoin enters the system—and how transactions are confirmed.

  • Miners are people who use powerful computers to solve tough math problems. The first one to solve it gets to add the next block to the blockchain and earns some new Bitcoin as a reward.

  • This process is called Proof of Work (PoW)—and it keeps the whole system honest and secure.

    What Is Bitcoin Used For?

  • Buying Things: Many websites and shops now accept Bitcoin.

  • Sending Money: You can send Bitcoin to anyone, anywhere—fast and with low fees.

  • Investing: Lots of people buy Bitcoin, hoping its value will go up over time.

    Who Created Bitcoin?

  • Bitcoin was introduced in a 2008 whitepaper by Satoshi Nakamoto. No one knows who this person is—he/she/they have never revealed their identity.

  • In 2009, Satoshi sent the first Bitcoin to a developer named Hal Finney. It was the beginning of something big.

    Fun Fact: Bitcoin Pizza Day.

  • In 2010, a programmer named Laszlo Hanyecz bought two pizzas for 10,000 BTC—worth millions today. That day, May 22, is now called Bitcoin Pizza Day.

    How Many Bitcoins Are There?

  • There will only ever be 21 million bitcoins. As of now, over 94% have been mined. But the rest will be created slowly—over the next 100+ years—through a process called halving.

    What Is Bitcoin Halving?

  • Every 4 years, the reward miners get is cut in half. This slows down how many new bitcoins are created, helping control inflation and keep Bitcoin valuable.

    Is Bitcoin Safe?

  • Bitcoin is secure if you use it carefully:

  • Use strong passwords and 2FA.

  • Never share your private key.

  • Use trusted wallets.

  • Be careful of scams and phishing emails.

  • But remember: Bitcoin prices can go up and down a lot. Only invest what you can afford to lose.

    Final Thoughts.

  • Bitcoin changed how we think about money. It gives people freedom, privacy, and control over their finances.

  • Whether you want to invest, use it for shopping, or just learn more—understanding Bitcoin is a great first step into the future of digital finance.

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