BitcoinMadeClear

What is Bitcoin actually doing?

Bitcoin lets people send digital money without a bank handling the payment. Start by separating the payment record, the rules and the keys that approve spending.

Updated

Jump to a question

What will you learn?

  • Explain what the shared record does.
  • Distinguish a balance from control of spending.
What is Bitcoin actually doing?Wallet: Approves a payment. Network: Checks the rules. Shared record: Records who can spend.WalletApproves a paymentNetworkChecks the rulesShared recordRecords who can spend
Wallet: Approves a payment. Network: Checks the rules. Shared record: Records who can spend.

What is the idea?

The bitcoin is recorded on a shared history, not stored as a little coin file in your phone. Many computers keep copies and check whether payments follow the rules. A wallet helps you work with that record.

A payment changes who can spend an amount. To approve it, a wallet uses secret key information. Other computers can check the approval without being told the secret. They also check that the amount has not already been spent in the accepted history.

Payments are grouped into blocks, and each block refers to the one before it. That linked history is called a blockchain. A payment can be visible before it is included in a block, so appearing on a screen is different from being confirmed.

BTC is a short label for bitcoin. Other crypto-assets can have different records and rules. A familiar category or name does not make them the same asset.

Can you picture an example?

Imagine you send bitcoin to a friend. Your wallet approves a payment, the network checks it and a block can add it to the history. You have changed spending control, rather than sent a coin picture.

What do you remember?

Choose an answer for each question, then check your answers. You can try again. Your choices are not sent or stored by the quiz.

1. Where is bitcoin recorded?
2. What does a wallet use to approve spending?
3. What is a block?
4. Does seeing a payment always mean it is confirmed?
5. What does BTC identify?

Read the answers and explanations
  1. In the shared payment history. The shared history records the bitcoin; the wallet helps you work with it.
  2. Secret key information. The wallet makes an approval using secret key information.
  3. A group of payments in the history. Payments are grouped into blocks that refer to earlier blocks.
  4. No. A payment can be visible while it is still waiting for a block.
  5. Bitcoin. BTC is the short label for bitcoin, rather than a name for every crypto-asset.
Sources