At its core, Bitcoin is purely information about transactions - there are no actual "coins," either physical or digital. Instead, Bitcoin exists as entries in a specialized database called the blockchain. This is similar to how 90% of traditional money exists only as digital records - for example, only about 10% of U.S. dollars exist as physical cash.

The Bitcoin Blockchain's Key Characteristics:

1. Distribution and Decentralization
   • The ledger is stored across thousands of computers (nodes) worldwide
   • Uses a peer-to-peer network structure with no central server
   • Nodes can come and go freely; the network adapts automatically
   • Operating in 100+ countries makes it resistant to government control
   • Node count fluctuates with Bitcoin's price (more nodes when price rises)
2. The Immutable Chain Structure
   • Transactions are grouped into "blocks" every ~10 minutes
   • Each block contains:
     • A list of new transactions
     • The cryptographic hash of the previous block
     • A hash of its own contents
   • Blocks are "chained" together through these hashes
   • Changing any transaction would break the chain of hashes
   • To hack the blockchain, you'd need to:
     • Modify the target block
     • Recalculate all subsequent block hashes
     • Convince thousands of nodes to accept the changes
     • Do this faster than new blocks are being added
     • This is computationally infeasible!

The Cryptography Behind Bitcoin

Bitcoin uses public-key cryptography in several clever ways:

1. Key Generation and Relationships
   • Everything starts with a private key
   • The private key generates a public key
   • The public key generates a Bitcoin address
   • All three are mathematically linked
   • Example address: 1L7hHWfJL1dd7ZhQFgRv8ke1PTKAHoc9Tq
2. Transaction Signing Process
   • To send Bitcoin, you create a message like: "Send X Bitcoin from Address A to Address B"
   • Sign the message with your private key
   • Include your public key with the message
   • Bitcoin network nodes (servers) can verify:
     • The signature matches the public key
     • The public key matches the sending address
     • Only the private key holder could have created this signature

Bitcoin Wallets: Your Interface to the Network

Wallets are better thought of as "keychains" than storage containers:

• They don't actually hold Bitcoin
• They store your private/public key pairs
• They generate new addresses as needed
• They create and sign transactions
• They communicate with the Bitcoin network
• They track your balance by monitoring the blockchain

Types of Wallets:

• Hot wallets: Connected to the internet
• Cold wallets: Offline storage
• Hardware wallets: Dedicated devices
• Paper wallets: Printed key information
• Brain wallets: Memorized keys
• Metal wallets: Etched in metal for durability

Critical Security Principle: "Not your keys, not your Bitcoin"

• Whoever controls the private key controls the Bitcoin
• If someone else holds your keys (like an exchange), they control your Bitcoin
• Lost private keys mean permanently lost access to Bitcoin
• No "password reset" option exists

The Network in Action

When you make a Bitcoin transaction:

1. Your wallet:
   • Creates the transaction message
   • Signs it with your private key
   • Broadcasts it to the Bitcoin network
2. Bitcoin nodes:
   • Receive the transaction
   • Verify the cryptographic signature
   • Check that you have sufficient funds
   • Add valid transactions to the "mempool"
   • Eventually include them in a new block
3. The blockchain:
   • Permanently records the transaction
   • Makes it visible to all participants
   • Prevents double-spending
   • Maintains the complete transaction history

Important Technical Points:

• The blockchain is unencrypted and public
• Transactions are pseudonymous (not anonymous)
• Each block has a unique hash identifier
• Mining nodes compete to add new blocks
• New Bitcoin enters circulation through mining rewards

This architecture creates a system that is:

• Trustless: No need to trust any individual or organization
• Permissionless: Anyone can participate
• Censorship-resistant: No central point of control
• Transparent: All transactions are public
• Secure: Mathematically protected from tampering
• Global: Operates across borders
• Available: Runs 24/7/365

The genius of Bitcoin's design is how it combines these elements to create a decentralized currency system that can operate without any central authority. While the technology is complex, user interfaces are continuously improving to make Bitcoin more accessible to everyone.