Everyone says $BTC is secure and unhackable—but how does it actually work behind the scenes? Every Bitcoin transaction relies on mining, the SHA-256 cryptographic algorithm, and a unique system called UTXOs. Curious how it all fits together?
Bitcoin mining is a crucial process that powers and protects the Bitcoin network, utilizing computers to solve hard arithmetic problems. The process, known as Proof of Work (PoW), allows anyone to mine Bitcoin, with the first computer to do so adding the next block of transactions to the blockchain. A block reward is given to miners for successfully adding a block to the blockchain, which includes a set number of new Bitcoins and transaction costs.
The SHA-256 algorithm, which is at the heart of Bitcoin mining, is a cryptographic shield that protects Bitcoin and other sensitive systems. Its reliability, one-way structure, and resistance to tampering make SHA-256 a global standard in digital security, not just in crypto but in everything that needs trust and integrity. The SHA-256 algorithm is a crucial part of Bitcoin's security, providing a deterministic, one-way function that guarantees tamper-proof proof of work and a security backbone.
UTXOs, or Unspent Transaction Outputs, are the basic way Bitcoin keeps track of who owns what. When someone sends Bitcoin, they receive one or more UTXOs, which are used when spending Bitcoin and creating new ones. UTXOs also offer privacy, efficiency, and programming capabilities, allowing for advanced features like time-locks and multi-signature wallets.
Bitcoin transactions work by combining mining, SHA-256, and UTXOs together. Mining secures and spreads out the process of checking transactions globally, SHA-256 prevents tampering, and UTXOs keep track of who owns what. This interaction makes Bitcoin secure, peer-to-peer, and resistant to censorship, without the need for a central server, enterprise, or government.