A brief guide to how Bitcoin works - this guide is meant as an overview. Sources used appear at the end.

1. BITCOIN
CLARE JOHNSON

2. WHAT IS BITCOIN?
“A digital currency in which transactions can be performed
without the need for a central bank”
• It is the first implementation of a concept called Cryptocurrency
• It is the first decentralised peer-to-peer payment network
• Specification and proof of concept first published by Satoshi
Nakamoto in 2009

3. KEY FEATURES OF BITCOIN
• Nobody controls the Bitcoin network
• It has a decentralised structure
• Anyone can view the software used to create Bitcoin
• ‘Cash for the Internet’

4. BITCOIN STATISTICS
• Maximum number of Bitcoins
is 21 million
• Currently just under 15
million in circulation
0
5
10
15
20
25
No of Bitcoins
Number currently in circulation
Total coins available

5. HOW DOES BITCOIN WORK?
• The Bitcoin network shares a public ledger or book of accounts
called the blockchain
• The ledger contains every transaction ever processed, allowing
a user's device to verify the validity of each transaction
• The authenticity of each transaction is protected by digital
signatures corresponding to the sending addresses, allowing all
users to have full control over sending bitcoins from their own
Bitcoin addresses

6. HOW DO I USE IT?
• Download an app to your computer or mobile device called a digital
wallet
• The wallet uses software to generate Bitcoin addresses
• Acquire Bitcoins – either by buying them or by selling something for
Bitcoins
• Each address in your wallet has its own Bitcoin balance
• To pay for something with Bitcoins you will need the Bitcoin address
for the sale
• The transactions takes place within seconds, but verification can take
10 minutes or so

7. WHAT INFORMATION IS REQUIRED FOR A
TRANSACTION?
If Alice sends some bitcoins to Bob, that transaction will need the
following information:
• An input: this is a record of which bitcoin address was used to
send the bitcoins to Alice in the first place (she received them
from her friend, Eve).
• An amount: this is the amount of bitcoins that Alice is sending
to Bob.
• An output: this is Bob's bitcoin address
• The Blockchain – this is used to verify all transactions

8. THE BLOCKCHAIN
• The blockchain contains all previous transactions
• Alice makes a payment to Bob
• Bitcoin miners look at the payment and calculate a mathematical
function based on the last transaction stored on the blockchain and
the next pending transaction
• The miner to solve the function first adds the transaction and result
to the blockchain
• The miner gets paid in Bitcoins for her efforts
• The transaction is verified

9. RESOURCES
• https://youtu.be/ZT26y_l-jtI (Video explaining bitcoin basics,
Mashable)
• https://www.weusecoins.com/ (Video explaining bitcoins,
WeUseCoins.com)
• https://bitcoin.org/en/faq#who-created-bitcoin (Bitcoin FAQ,
Bitcoin.org)
• https://www.bitcoinmining.com/ (Video explaining bitcoin mining,
Bitcoinmining.com)
• https://youtu.be/l9jOJk30eQs (Block chain explained video,
CuriousInventor)