FAQ

Bitcoin (BTC) is a virtual currency that operates through the decentralized Bitcoin network, meaning it is not controlled by any government or financial institution. All transactions are recorded on a public ledger called the Bitcoin blockchain, a transparent and accessible database.

The Bitcoin network is a decentralized virtual currency system that operates without a central bank, government agency, or intermediary. Instead, it relies on a network of computers around the world to maintain the system's integrity.

The Bitcoin network consists of a globally distributed community of nodes. Nodes are computers that connect to the Bitcoin network and help verify transactions. Anyone in the world can run their own node and participate in the network, ensuring that no single entity can control the blockchain. This decentralization makes the system resilient and secure.

When someone sends Bitcoin to another person, the transaction is verified by a network of "miners." Miners use their machines to generate hashes through trial and error, aiming to produce a hash that meets or exceeds the network's set target. This process is designed to incentivize miners to contribute valid new blocks by requiring them to invest time, energy, and capital in participating in the network.

This method of reaching consensus among users without relying on centralized control is called a "consensus mechanism." Miners who successfully generate a valid hash value gain the right to add their proposed block to the blockchain. Other miners in the network then collectively verify the block's transactions. They perform verification by checking that the sender has enough Bitcoin to complete the transaction, rather than attempting to double-spend their balance.

Once the network verifies the proposed block, it is permanently added to the Bitcoin blockchain. Once a block is added to the blockchain, no one can modify the data stored in it.

How does blockchain work? ⚙️

Think of a blockchain as virtual blocks filled with data, linked together using cryptographic techniques to form a traceable digital chain. The computers that help update, manage, and verify blockchain information are called "nodes."

When someone initiates a blockchain transaction, it is broadcast throughout the entire blockchain network. Each node then verifies the transaction to ensure the sender has sufficient funds and is not attempting to fraudulently spend the same transaction twice.

Once verified, the transaction is added to a new block and then committed to the blockchain ledger, creating a chronological record of transactions.

How do cryptocurrencies work? ⚙️

Blockchain users can use cryptocurrencies in a variety of ways. Some use them as a medium of exchange for the electronic transfer of value in a peer-to-peer manner. Others use them as a store of value, free from the control of their counterparts in government-backed currencies. Ultimately, cryptocurrencies function similarly to traditional currencies or valuable commodities like gold.

New coins enter circulation in the form of validator rewards from blockchain consensus mechanisms such as Proof-of-Work (PoW) and Proof-of-Stake (PoS). These processes require network users to either "work" through the PoW mining process to mine coins or lock up coins by staking to earn rewards through the PoS process.