How does bitcoin work...

Added: 2026-05-27

[00:00:00]How does Bitcoin work? Bitcoin is just a decentralized digital currency that uses a peer-to-peer network to facilitate and verify payments. While physical currencies lose value to inflation, Bitcoin relies on strict mathematics and a maximum limit of 21 million coins to create absolute digital scarcity. The secret is the distributed ledger, commonly known as the blockchain.

[00:00:16]Instead of a central bank keeping track of your account balance, a copy of every single transaction ever made is stored simultaneously on thousands of independent computers worldwide called nodes. When you send Bitcoin, the transaction is broadcast to this open network. The system checks the public history to verify you actually have the funds, making it impossible to double spend or counterfeit a single coin.

[00:00:35]However, the interesting thing is Bitcoin mining, massive warehouses of specialized computers, compete in a global lottery to group these pending transactions into a block. They run the block data through an incredibly intensive cryptographic algorithm called Ssha 256, guessing trillions of random numbers per second to find a unique mathematical solution. The first minor to solve it wins the right to lock that block into the permanent chain, earning newly minted Bitcoin as a reward for securing the network. Once a block is locked, changing a past transaction is virtually impossible because an attacker would have to outcomputee the entire global network combined, which should be impossible.