Bitcoin: How Does It Work?
By Mahima December 19, 2023
Bitcoin is a decentralized digital currency that is exchanged between two parties without involving intermediaries.
As defined in a whitepaper released by Bitcoin's secret inventor, Satoshi Nakamoto, Bitcoin is a purely peer-to-peer version of electronic cash.
It allows online payments to be made directly from one party to another without going through a financial institution.
To understand Bitcoin, one needs to understand the underlying structure, the way the Bitcoin ecosystem operates and the extent of its use in India.
How does Bitcoin work?
Bitcoin eliminates middlemen with the help of its underlying technology, blockchain.
Currently if you need to transfer money to someone, one of the possible methods is to give cash or alternatively use a trusted intermediary.
Both mechanisms, be it physical cash or electronic transfers, involve an intermediary. When intermediaries are involved, there are transaction costs.
This cryptographic trust program is built into Bitcoin through a wallet, a public key, and a private key.
Who Can Create
Anyone can create a Bitcoin wallet for free by downloading a Bitcoin program. Every wallet has a public key and a private key.