How does Bitcoin work?
Here's a quick explanation about how
does Bitcoins Works.
The basic concept for a new Bitcoin Mining User
As a new user, you can Get started with Bitcoin without
understanding the technical details. Once you have installed a Bitcoin wallet on your computer or
mobile phone, it will generate your first Bitcoin
address and you can create more whenever you need one. You can disclose
your addresses to your friends so that they can pay you or vice versa. In fact,
this is pretty similar to how email works, except that Bitcoin addresses should
only be used once.
Balances -
block chain
The block chain is a shared
public ledger on which the entire Bitcoin network relies. All
confirmed transactions are included in the block chain. This way, Bitcoin
wallets can calculate their spendable balance and new transactions can be
verified to be spending Bitcoins that are actually owned by the spender. The
integrity and the chronological order of the block chain are enforced
with cryptography.
Transactions -
private keys
A transaction is a transfer
of value between Bitcoin wallets that gets included in the block
chain. Bitcoin wallets keep a secret piece of data called a private key or
seed, which is used to sign transactions, providing a mathematical proof that
they have come from the owner of the wallet. The signature also
prevents the transaction from being altered by anybody once it has been issued.
All transactions are broadcast between users and usually begin to be confirmed
by the network in the following 10 minutes, through a process called mining.
Processing -
mining
Mining is a distributed
consensus system that is used to confirm waiting
transactions by including them in the block chain. It enforces a chronological
order in the block chain, protects the neutrality of the network, and allows
different computers to agree on the state of the system. To be confirmed,
transactions must be packed in a block that fits
very strict cryptographic rules that will be verified by the network. These
rules prevent previous blocks from being modified because doing so would
invalidate all following blocks. Mining also creates the equivalent of a
competitive lottery that prevents any individual from easily adding new blocks
consecutively in the block chain. This way, no individuals can control what is
included in the block chain or replace parts of the block chain to roll back
their own spends.
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