How Bitcoin Works in 5 Minutes

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A short introduction to 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.

One of the key inquiries many individuals have about Bitcoin spins around the tokens themselves. Inquiries regarding its esteem, security and history, all in the long run prompt one place: Where do bitcoins originate from?

While conventional cash is made through (focal) banks, bitcoins are “mined” by Bitcoin mineworkers: arrange members that perform additional errands. In particular, they sequentially arrange exchanges by incorporating them in the Bitcoin pieces they find. This keeps a client from spending the same bitcoin twice; it understands the “twofold spend” issue.

Skirting the specialized subtle elements, finding a square most intently looks like a kind of system lottery. For each endeavor to attempt and locate another square, which is fundamentally an arbitrary figure for a fortunate number, a mineworker needs to spend a modest measure of vitality. The greater part of the endeavors come up short and a digger will have squandered that vitality. Just once about at regular intervals will a digger some place succeed and in this manner add another square to the blockchain.

This likewise implies whenever a mineworker finds a legitimate square, it must have factually consumed considerably more vitality for all the fizzled endeavors. This “verification of work” is at the core of Bitcoin’s prosperity.

For one, proof of work keeps excavators from making bitcoins out of nowhere: they should consume genuine vitality to procure them. What’s more, two, proof of work hardens Bitcoin’s history. In the event that an assailant were to attempt and change an exchange that occurred before, that aggressor would need to re-try the greater part of the work that has been done since to get up to speed and build up the longest chain. This is essentially unimaginable and is the reason excavators are said to “secure” the Bitcoin arrange.

In return for securing the system, and as the “lottery value” that fills in as a motivating force for consuming this vitality, each new piece incorporates an extraordinary exchange. It’s this exchange grants the mineworker with new bitcoins, which is the manner by which bitcoins first come into dissemination. At Bitcoin’s dispatch, each new square granted the digger with 50 bitcoins, and this sum parts at regular intervals: Currently each piece incorporates 12.5 new bitcoins. Also, diggers get the opportunity to keep any mining expenses that were connected to the exchanges they incorporated into their squares.

Anybody can turn into a Bitcoin excavator to attempt and gain these coins. In any case, Bitcoin mining has turned out to be progressively specific throughout the years and is these days for the most part done by committed experts with particular equipment, shoddy power and frequently enormous server farms.

To mine aggressively today, you have to recognize what you’re doing, you should will to contribute critical assets and time, and — to wrap things up — you require access to modest power. In the event that you have the majority of this, you also can give it a shot and turn into a Bitcoin digger.

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26 thoughts on “How Bitcoin Works in 5 Minutes

  1. This is one of the best explanations of bitcoin I have seen.

    As suggestion for a future video.  You could explain how TOR works.

    1. You mask your ip by tunneling through several different computers connected to the tor network.

  2. I think the terms need to be a bit more relate-able for most people to understand. Like the voting and lottery, happens automatically and is known as the process of mining and miners. You mention miners once or so at the end but talk about the process of it from the halfway point to the end. Also, I think for the most part, it needs to be noted that this entire process happens automatically behind the scenes. The way you explain it almost sounds like a lot of it has to be done manually on a PC by the users. For example when u first the validation / voting process, it sounds like in order for a users transaction to be accepted into a block, that user would have to generate the block ; another manual implication.

    1. That’s great feedback that I’ve heard from others. In my next (less technical) video I’m trying to say more things like “your Wallet app creates a transaction…”

  3. I was lying down when watching this I literally almost fell asleep.
    I’m doomed plus there’s math involved yea….

  4. I’m a software dev with 3 decades of experience, but still struggle comprehending all of the bitcoin ecosystem. The 22 minute “How bitcoin Mining Works” helps greatly, but it would help to see an explanation (i.e. historical analysis) of the first 10 or 20 transactions starting at block 0. The genesis block started with 50 BTC, so how did that get spent, when was the first block created, how many transactions did it have, how did new BTC produced by the miners get spent into the transaction chain etc. I’m thinking if I saw how the 3 purposes of mining were fulfilled thru the actual early transactions it would “click” for me and all the pieces would lock into coherent understanding.

    1. +TechGarage The Genesis block had it’s difficulty at the lowest possible setting so the math problem was simple enough you could do it on a board or on paper if I recall correctly. the difficulty automatically scales up and down depending on how fast new blocks are generated. that’s how the flow of new coins is controlled.

      I’m kinda confused by what you mean by “spent into the transaction chain”.
      as for the other info, I think you can probably google for it semi-easily or search on the bitcoin forum or wikis.

    2. By “spent into the transaction chain” I mean where did the coins produced from the first block that was mined go? I envision a tree diagram where the original coins from the genesis block (they weren’t mined but were just created out of thin air to reside in the genesis blk; they might be referred to as “premined coins) were transferred (i.e. spent) to an address. Then a miner verified the source (gen. blk) and created the first blk that included that transaction.

  5. The central banks must be so shitting themselves right now. Just imagine how banks would stop stealing trillions, currencies would not get devaluated and how fair the global economy would become. The only problem is money laundering… that’s bad.

  6. This really helped me understand bitcoin better thanks dude! 😀 You did a really good job at explaining it all.

  7. how much bitcoin do u think a quantum computer could make if they existed/got working cause i know people have made a quantum computer but getting it to predict the correct mathematical outcome is a hurdle .

  8. There are many mistakes in this video. There is no “balance” in bitcoin, only transactions. The blocks are the essential element securing the network (including the problem of time) and they are left out. Nobody tries to link their own transactions to the ledger, people try to link blocks, and this allows them to put a transaction to themselves at the end of the block (generating new coins). Understanding Bitcoin is complicated and will not take 5 minutes, if you’re interested I’d recommend the course at If you are only willing to spend 5 minutes understanding bitcoin then go grab a beer and forget about it.

  9. Great graphics but talks so fast about so much technical detail in just 5 mins that after watching it twice I still only vaguely understand it.

  10. You’re kidding me! Someone is supposed to understand this?! This is an example of why Bitcoin doesn’t work, won’t ever work.

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