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How does Bitcoin work?

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Quick answer

Bitcoin works as the first decentralized cryptocurrency, a network where people send digital coins without banks. Transactions are bundled into a blockchain and confirmed by 'miners' who compete to solve hard math puzzles, securing the system and earning new coins.

Step by step

  1. It's the first and best-known cryptocurrency, launched in 2009.
  2. Transactions are recorded on a public blockchain.
  3. 'Miners' confirm transactions by solving hard computations.
  4. Mining secures the network and releases new bitcoins.
  5. Its total supply is capped at 21 million coins.

People also ask

How does Bitcoin mining work?
Miners compete to solve a hard math puzzle; the winner adds the next block of transactions and earns newly created bitcoins plus fees.
Why is there a limited number of bitcoins?
Its rules cap the supply at 21 million to make it scarce, unlike traditional money that central banks can print more of.
Is Bitcoin anonymous?
Not fully — transactions are public on the blockchain under addresses, so it's pseudonymous and can sometimes be traced to people.