How Bitcoin Works Under the Hood

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The basics for a new user

As a new user, you can get started with Bitcoin without understanding the technical details. Once you have installed a Bitcoin wallet on your computer or mobile phone, it will generate your first Bitcoin address and you can create more whenever you need one. You can disclose your addresses to your friends so that they can pay you or vice versa. In fact, this is pretty similar to how email works, except that Bitcoin addresses should only be used once.

A somewhat technical explanation of how Bitcoin works. Want more? Check out my new in-depth course on the latest in Bitcoin, Blockchain, and a survey of the most exciting projects coming out (Ethereum, etc):
Lots of demos on how to buy, send, store (hardware, paper wallet). how to use javascript to send bitcoin. How to create Ethereum Smart Contract, much more.

The Blockchain

Bitcoin is a system that keeps running on a convention known as the blockchain. A 2008 paper by a man or individuals calling themselves Satoshi Nakamoto first portrayed both the blockchain and bitcoin, and for some time the two terms were everything except synonymous. The blockchain​ has since been thoughtfully separated from its first application, and a huge number of blockchains have been made utilizing comparable cryptographic strategies. This history can make the terminology confounding. “Blockchain” some of the time alludes to the first, bitcoin blockchain; different circumstances it alludes to blockchain innovation when all is said in done, or to some other particular blockchain, for example, the one that forces Ethereum​.

The fundamentals of blockchain innovation are kindly clear. Any given blockchain comprises of a solitary chain of discrete squares of data, masterminded sequentially. On a fundamental level this data can be any series of 0s – messages, contracts, arrive titles, marriage testaments, security exchanges – and this flexibility has gotten the attention of governments and private enterprises. For bitcoin’s situation, however, the data is generally exchanges.

Bitcoin is extremely only a rundown. Individual A sent X bitcoin to individual B, who sent Y bitcoin to individual C, and so forth. By counting these exchanges up, everybody knows where singular clients stand. Another name for a blockchain is a “dispersed record,” which accentuates the key contrast between this innovation and a well-kept Word doc. Bitcoin’s blockchain is open. Anybody can download it completely or make a beeline for any number of locales that parse it. You can see, for instance, that 15N3yGu3UFHeyUNdzQ5sS3aRFRzu5Ae7EZ sent 0.01718427 bitcoin to 1JHG2qjdk5Khiq7X5xQrr1wfigepJEK3t on August 14, 2017, in the vicinity of 11:10 and 11:20 a.m. On the off chance that you were law implementation or generally extremely advanced, you could most likely make sense of who controlled these addresses (the long series of numbers and letters). Bitcoin’s system isn’t absolutely mysterious, as it were, however avoiding potential risk can make it difficult to connect people to exchanges.



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24 thoughts on “How Bitcoin Works Under the Hood

  1. Thanks, very informative video. Can I tip you some Doge? That’s all I’ve got.

    I’m specifically looking for the math involved behind solving a block, if you have any ideas of where I can find that. Thanks.

    1. The math of mining a block is to take the previous block hash and a “nonce” which is normally a new number that you keep clocking upwards, and a couple of other things, you perform a double SHA-256 hash operation. 
      If the result you get starts with enough zeroes, you have a solution, otherwise, you try a new nonce. The result will always be 256 bits in size and when written in hexadecimal, you will use numerals in the set of 0-9 and a-f. The “difficulty level” of the bitcoin network is ever changing, as it increases, so does the number of leading zeroes required to make an accepted solution.

  2. 0:10 overview, 1:38 sending money, 3:45 txns and ledger detail, 6:19 complex txns, 7:40 anonymity, 9:20 txn security, 10:50 ordering of txns, 11:02 blockchain, 12:10 crypto hash, 13:37 end of chain insecurity, 14:05 double spend attacks, 16:00 why double spend is hard to pull off, 17:45 mining, 18:30 txn fees, 19:00 mining pools, 21:11 recap

  3. What happens if the list with inputs and the blockchain gets very, very large, to the point of people not being able to store a copy of it in their computers?

    1. +zubie7a Maybe some form of archiving – at block x all the nodes agree that their transactions are up to date then they start a new list from that point onwards?

  4. Thanks for uploading this, I’ve been watching quite a bit about Bitcoin and this is the most in depth video I’ve found yet. Must have taken quite a bit of research to get all of this figured out.

  5. This would be a great asset, to country like mine, Somalia, that does not have central bank and you always have to keep your money as cash in your home that makes it very dangerous.

  6. Awesome work. I want to donate btc to you. Should i send btc to the address provided below “my address” ? Let me know. Thanks.

  7. If BTC saved thousands of peoples lives each year, and cuts down on impact upon nature by 97%.
    Then this is Progressive and saving the planet!

    Also, mining BTC will be over within 70 years. Then their will never be a need for mining again. However, FIAT will need to be mined the metal, forest cut, toxic ink, troops transports and bank robberies for the next 10,000 years at least.
    70 years, and no more mining BTC ever again. Only 21-million will ever be minted.

    Also, 3% of BTC has been used for drug’s. While a staggering 87% of USD has been used for drugs. And 83% of USD has drug residue physically on them, harming little children. No BTC ever has any drug residue on them. Also, almost all drug bust around the world also include massive amounts of untraceable United States Dollars on hand.
    Bitcoin is 100% traceable all of the time.

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