Limited Supply - 21 million Bitcoins will only ever exist.
Dencentralisation - No one entity owns or runs Bitcoin (similar to the internet).
Permissionless - Anyone can use or build on Bitcoin without the need for permission.
Deflation - Bitcoin started by releasing 50 Bitcoins about every 10 minutes and this amount halves about every 4 years. 25, 12.5, 6.25, 3.125.......... all the way to 0.00000001.
Censorship Resistant - Every single transaction is processed.
Transparent - All transactions that have ever taken place can be viewed on the blockchain.
Divisibilty - Bitcoins smallest unit is called a satoshi or sats. 0.00000001 Bitcoin equals 1 satoshi/sat.
A wallet is used to store your Bitcoin (technically your wallet stores private keys, that prove you own Bitcoin).
There are 3 main types of wallets: Phone Wallet, Desktop Wallet and Hardware Wallet.
Phone Wallet - Is an app you download and install on your phone. It is easy to use and should be used for day to day transactions. It is recommended not to store a lot of Bitcoin on phone wallets.
Desktop Wallet - As the name suggests it is a wallet for your computer. Most computer wallets are easy to use but are not as practical for day to day transactions as phone wallets. Also you can have a full node wallet or a lightweight wallet (explained further down).
Hardware Wallet - Is one of the most secure ways to keep your Bitcoin safe. Hardware devices such as a Trezor or Ledger are used in conjunction with your computer to store your Bitcoin. Treat a hardware wallet as your savings account.
When you create a new wallet a recovery seed will be generated (if your wallet doesn't do this, use a different one). Most of the time it will be a random 12 word phrase, example:
paper type pool history hire catch goodbye eternal ladder frozen myself settle
Ensure this is written down and kept somewhere safe. DO NOT SHOW ANYONE.
If your computer breaks or your phone is lost, you can recover your Bitcoin using the recovery seed.
A public address is almost like an email address. This is what you need to give to people for them to pay you. It is perfectly safe to give your public address to anyone.
Here is an example of a public address:
If you are using a Bitcoin mobile wallet, most of the time you'll not see your private key instead you will get a recovery seed. Your private key will be embedded in your wallet.
Here is an example of a private key:
Do not show your private key to anybody. This is the proof that you own the Bitcoin. If someone else gets your private key they can steal your Bitcoin
Lets Explain exactly what is happening in this diagram.
John The Legend wants to buy a Tesla Roadster from Elon Musk.
John opens his wallet and sends a Bitcoin to Elon Musk.
Almost instantly Elon will see the 1 Bitcoin appear in his wallet without any confirmations.
Lets look at what happens under the hood when John sends the Bitcoin. The transaction is sent out to full nodes, what is a full node?
A full node is a computer that is running special software that contains the entire blockchain and is connected to other full nodes, normally about 8.
When a full node receives a transaction it verifies the transaction by checking about 20 rules, if the transaction is good it relays to the other connected full nodes and they do the same check and relay it and that continues across the entire network, this happens very fast. If a transaction fails any of the checks the transaction is rejected and not relayed. Every full node performs all the checks independently.
Here are some of the rules simplified:
The amount sent is not more than the amount owned.
The Bitcoin has not already been spent (double spend).
Check format of transaction
Here are all the rules that are checked but do not worry too much about them at this time just know that each full node performs a lot of checks so no one can cheat:
So now that John’s transaction is being relayed and checked by thousands of full nodes and is spreading throughout the entire network how does it get added to the blockchain and confirmed.
Throughout the network certain full nodes are also miners.
Any full node that is a miner will create a memory pool where all the transactions they get are stored. These transactions are then added to the blockchain by the winning miner. When the winning miner solves the problem, all transactions in their memory pool and a bunch of other stuff form a block and are added to his blockchain.
How is everyone else's blockchain updated? The winning miner also send out the block to everyone else. Everyone independently verifies the answer, if correct they update their blockchain with the new block and the process starts again.
As you can see the whole process works on consensus.
If Johns transaction was in the memory pool of the winning miner Elon will now see one confirmation next the Bitcoin he has received.
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