Bitcoin Simplified

What is bitcoin?

Bitcoin is just a ledger of transactions which everyone on the bitcoin network has a copy of. Think of it as something like a ledger/binder with pages of transactions, where each transaction entry lists down a source, the previous transaction entry from a previous page, and the receiver.

If its just a ledger can’t anyone just put in their own entries?

No, for an entry to be included in the ledger you need to prove that you are the recipient of a previous entry you are referencing. Also, you will need to win a lottery of sorts for the right to input entries into the ledger, this is what’s called bitcoin mining.

Bitcoin mining??? Wat?

Think of it as something like a lottery for the right to be the “clerk” who’s in-charge of entering transactions into a page, known as a block, that’s going to be part of our “binder/ledger”.

People send him transactions they want entered into the ledger, and he verifies if indeed the party sending him the transaction is the recipient of the previous transaction.

Doesn’t this give too much power to the lottery winner?

No, because when the lottery winner submits a page for inclusion into the ledger, everyone who’s part of the network (all other miners, transaction owners) can check whether indeed the entries in the page are valid.

So if it’s just a ledger, how are “bitcoins” produced?

The right to be the “clerk” stated above, comes with another perk: winning the lottery also gives the lottery winner the right to a transaction entry assigning a specified number of coins determined beforehand to a chosen recipient.

So how do i get to own bitcoins?

Easy, you buy from someone who’s a recipient of certain transactions in the ledger. He’ll make a request to add an entry into the latest page of the ledger assigning to you bitcoins he own as the new recipient/owner.

Or you can try to win the “lottery” as stated above

So there you have it. Bitcoin as simple an explanation as can be.

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