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Transactions lie at the heart of Bitcoin; they enable not only a secure transfer of bitcoins, but also the inscription of arbitrary data into the <a href="https://d.center/explore/bitcoin-blockchain" class="ek-link">blockchain</a>.



Transactions are basically blockchain updates where the bitcoins are taken from one owner and assigned to another, sometimes under specific conditions.



A transaction contains inputs and outputs. Bitcoin has a particular structure without the traditional notion of “accounts”, where bitcoins ownership is tracked using transaction outputs called UTXOs. These outputs allow the wallet to retrace its balance by searching within the blockchain’s history.



The specific language used to code every transaction is called Script. It allows to securely carry out different types of transactions: from a simple bitcoin transfer to more complex transactions containing various conditions. Script also enables inserting into a transaction some arbitrary piece of information to be immortalized in the blockchain, thus making it an excellent data certification tool.



One of the key elements of the transactions is a digital signature. ECDSA - the algorithm used by Bitcoin - assures that the initiator of the transaction has their private key and thus can spend the bitcoins in question. It also allows to prove that the transaction data has not been modified along the way.



Bitcoin transactions also generate transaction fees, as an additional reward sent to miners in exchange for their work of securing Bitcoin and assuring its operations.

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The only one who can dispose of their bitcoins is the one holding the corresponding keys - cryptographic tools that secure transactions. #notyourkeysnotyourmoney



Bitcoin protocol largely rests on cryptography, but contrary to what one might think, in most cases it’s not about encrypting messages, but about creating digital signatures and footprints.&nbsp;



Digital signatures allow to safely transfer bitcoins from one person to another by exploiting the properties of asymmetric cryptography, which uses a pair of keys: private and public.



<a href="https://d.center/explore/bitcoin-private-key" class="ek-link">Bitcoin private key</a> is a very big randomly generated number, which must be kept secret and whose generation must be carefully chosen for security reasons. This key gives its owner an entire possession of bitcoins and therefore must be carefully kept, for when stolen, it will allow the thief to spend bitcoins, and when lost, bitcoins will become forever inaccessible.



<a href="https://d.center/explore/bitcoin-public-key" class="ek-link">Bitcoin public key</a> is derived from the private key via one-way cryptographic function, meaning that it is impossible to find a private key from the public key. 



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Private key allows the sender to sign a <a href="https://d.center/explore/bitcoin-transaction" class="ek-link">transaction</a>. Transaction’s content, the signature and the sender’s public key are used by the network to verify the sender’s authenticity and the integrity of data within the transaction. 



The receiver’s public key is used to identify him or her as a receiver within a transaction. For the sake of security and ease, the users do not transfer the public key as it is, but rather utilize its footprint called <a href="https://d.center/explore/bitcoin-address" class="ek-link">Bitcoin address</a>. The address is what users usually see, and it can be assimilated to an account number in a classical financial transaction. 



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In the case of Bitcoin a method called ECDSA (Elliptic Curve Digital Signature Algorithm) is used to derive public keys and sign transactions. 



The keys are generally created and managed by a <a href="https://d.center/explore/bitcoin-wallets" class="ek-link">wallet </a>- an application that connects the user to the <a href="https://d.center/explore/bitcoin-network" class="ek-link">Bitcoin network</a>.&nbsp;Private keys, public keys, addresses and wallets allow users to send and to receive bitcoins easily and safely, enjoying a total control over them in a decentralized environment.&nbsp;

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The wallet is an application that allows to communicate with the Bitcoin blockchain.&nbsp;



The wallet generates and manages users’ private and public keys and addresses, allowing to send and to receive bitcoins. Being connected to the <a href="https://d.center/explore/bitcoin-network" class="ek-link">Bitcoin network</a> and using the keys under its management the wallet retraces and keeps the balance of bitcoins belonging to the user. Every sending and receiving operation concerning the user’s address will be added to this balance. If a user wishes to send bitcoins, the wallet allows them to create, sign and propagate the <a href="https://d.center/explore/bitcoin-transaction" class="ek-link">transaction </a>to the network (see <a href="https://d.center/explore/bitcoin-keys-and-addresses" class="ek-link">Bitcoin keys and addresses)</a>.



A wallet does not directly contain bitcoins, but it manages the keys allowing to unblock bitcoins stored on the blockchain as transaction outputs called UTXO. The UTXOs indicate the amount of bitcoins that were transferred to a user.



There are different types of wallets that can be categorized according to different criteria.



<h2>Wallets by support</h2>







<ul><li>Desktop wallet: application installed on a computer, user owns his keys</li><li>Mobile wallet: application installed on a smartphone, user owns his keys</li><li>Web wallet (custodian): application accessible via a website, user does not own his keys (controlled by a website owner), but only website access password(s)</li><li>Hardware wallet: physical electronic device that must be connected to a computer or a phone. Users own their keys, which are stored offline (a method called cold wallet). This system of keys management is considered the most secure and is recommended for storing important amounts of crypto</li><li>Paper wallet: cold storage mechanism, user owns his keys on paper, but needs a hot wallet to interact with a blockchain</li></ul>







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<h2>Wallets by access to the Internet</h2>







<ul><li>Hot wallet: all the actions required to complete a transaction are made online. The wallet generates and stores private keys, digitally signs transactions using private keys, then broadcasts the signed transaction to the network. However, since the transaction is being signed on a computer connected to the Internet, an attacker may become privy to the private key</li><li>Cold wallet: transaction initiated online is temporarily transferred to an offline wallet (hardware or an offline software), where it is digitally signed with the private key and only then transmitted to the online network. As the private key does not come into contact with a computer connected online during the signing process, an online hacker would not be able to access the private key used for it</li></ul>







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<h2>Wallets by new keys generation method</h2>







<ul><li>Non-HD wallets: each new private key is generated regardless of the previous one</li><li>HD wallets: all generated private keys are derived from the “master key”, also called the “seed”. HD stands for “hierarchical deterministic”, which is the most popular method of keys derivation</li></ul>



For being user-friendly and secure, the majority of wallets now are HD, one seed controlling all the keys. If a wallet is destroyed or lost, one can simply get a new one and provide it with the seed: the wallet will reconstruct the keys and give control over related bitcoins.



In order to facilitate the usage of the seed, which is a very big number, a special standard has been introduced. It is called mnemonic and it translates the seed into a string of 12 or 24 words, which are generated during the first HD wallet initialization.







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<h2>Wallets by the way to access the blockchain</h2>







<ul><li>Full-node client: wallets that download all the blockchain and are constantly synchronized with the network. This kind of wallet is used mostly by validators and miners and it requires important memory and bandwidth. It is also the most secure wallet, as it does not imply any third party. Transaction fees can be customizable</li><li>Lightweight client (simple-payment verification or SPV client): the wallet connects to a full node and downloads only block headers. Being faster and less demanding, it is the case for mobile wallets. Transaction fees are suggested as low, medium and high</li></ul>







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There are numerous Bitcoin wallets combining different features according to user's needs: a hardware cold wallet for more security, a hot mobile lightweight wallet for more facility, a desktop full client wallet for more reliability etc...

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Bitcoin consensus allows network members to agree on the next block, incentivises them to maintain the blockchain and regulates the bitcoin emission. 



All the nodes of the Bitcoin network being equal in rights, the system needs a mechanism to determine which one among them will be able to add the next block to the blockchain. This decision is important, for an ill-intentioned node could be tempted to rewrite the history and spend the bitcoins which were already spent - a threat known as double spending. 



<h2>Proof-of-Work</h2>







The consensus used by Bitcoin is called the Proof-of-Work, or <a href="https://d.center/fr/explore/proof-of-work" class="ek-link">PoW</a>. The work here consists of finding a hash of the block header, which will start with a certain number of ‘0’. The hash is obtained by applying a cryptographic function that transforms any volume of data into a fixed length’ alphanumeric result. It is also a one-way function - it is easy to hash a piece of data, but almost impossible to guess the data from its hash. 



In order to get a hash starting with a ‘0’, the nodes called miners will add to the block header a number called nonce that will change its data and therefore its hash. The more ‘0’ required, the more difficult is the work, increasing the number of different nonces that a miner would have to try to produce a PoW. 



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For a better understanding of how the PoW works we recommend <a href="https://demoblockchain.org/block">https://demoblockchain.org</a> website, which proposes an excellent tool to understand the essence of the blockchain. 



In order to be efficient, mining requires a considerable amount of electricity and specific hardware. The money that a miner spends on adding a block serves in a way like a guarantee of their honesty: they literally invest into the network's security. 



<h2>Miner’s reward</h2>







The miner who finds a PoW propagates their block to the rest of the <a href="https://d.center/fr/explore/bitcoin-network" class="ek-link">network </a>who verify it. If the block is valid, it is integrated into the blockchain and miners start working on the next block, which will carry a mention to the previous one.



As a reward for their work miners insert into a block a special type of <a href="https://d.center/fr/explore/bitcoin-transaction" class="ek-link">transaction </a>called coinbase, which generates a predefined quantity of bitcoins and attributes them to the miner’s address. It also sends to the miner the fees paid by people who initiated transactions included into this block. However, in order to be sure that the block has really been accepted, a miner has to wait 100 blocks more to pocket the reward. 



<h2>Bitcoins creation </h2>



Bitcoin protocol is set to have a block added to the blockchain every 10 minutes on average, allowing to know emission rhythm beforehand. Such monetary emission is radically different from the classic one, depending on a Central Bank’s whim, and is one of the reasons Bitcoin was created.



As the Bitcoin network grows bigger, more and more miners join the competition in order to find a block’s PoW and add it to the blockchain. Their equipment is being constantly upgraded too. In order to maintain a stable emission rhythm in spite of technological progress Bitcoin protocol reacts by increasing the PoW difficulty - the number of necessary ‘0’. 



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Bitcoin is a deflationary currency: miners’ reward is cut by half every 4 years approximately, the event known as the halving. At this rhythm the maximum bitcoins quantity will be 21’000’000 - a number which will be approached by 2140. 
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Bitcoin network is based on a peer-to-peer (P2P) architecture and anyone can join it as a full node, a miner or an SPV wallet. 



A P2P network is a distributed IT network, where computers communicate directly without any central server. P2P means that computers are peers and have the same rights and functions, being both clients and servers. P2P network nodes communicate thanks to the specific program, somewhat erroneously called the “client”. The most used Bitcoin client is called Bitcoin Core. 



P2P architecture is fundamental for Bitcoin - an open network allowing anyone who has downloaded the protocol to join it and fulfill the same functions as the other members. In the absence of a central authority and with a big amount of nodes all capable of accomplishing essential tasks (and also evolving in a dynamic way) it is pretty hard to apply any censorship to the network, which makes Bitcoin a truly independent cryptoasset. 



<h2>Network nodes: full nodes, miners and SPV wallets </h2>



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The heart of the Bitcoin network is composed of full nodes - the nodes who stock the entire blockchain and are therefore capable of individually verifying transactions and blocks, in order to pass them on to the rest of the network. 



The miners and the SPV wallets connect to the full nodes. Miners need it to get the latest state of the blockchain (blocks and transactions) that will allow them to compete in finding the <a href="https://d.center/explore/proof-of-work" class="ek-link">PoW </a>and eventually submit their candidate block to the network for verification (see <a href="https://d.center/explore/bitcoin-consensus-and-mining" class="ek-link">Bitcoin consensus and mining</a>). 



SPV wallets are lightweight wallets that do not stock the entire blockchain, but only block headers, which means that they have to connect to the full nodes in order to be able to function (see <a href="https://d.center/explore/bitcoin-wallets" class="ek-link">Bitcoin wallets</a>). If they wish to, a full node can integrate a wallet feature without the help of other nodes, and a miner can have his own full node to access the blockchain. 



In order to integrate the network a new full node must contact an already active full node and download the blockchain. Once a full node joins the network, it will validate and transmit blocks and transactions. An SPV wallet also must connect to the network in order to send and receive transactions relative to the addresses it controls, but it will only download block headers (see <a href="https://d.center/explore/bitcoin-blockchain" class="ek-link">Bitcoin blockchain</a>).

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Bitcoin transactions are securely stored by the network, organized within a particular architecture called blockchain. 



<h2>Block structure </h2>



Transactions are gathered into blocks created by a miner approximately every 10 minutes. A block is made of a header, which contains specific data (notably the reference to the block’s content) and the <a href="https://d.center/explore/bitcoin-transaction" class="ek-link">transactions</a><a href="https://d.center/explore/bitcoin-transaction" class="ek-link"> </a>confirmed within the block. Every block contains a reference to the previous block in the form of its header’s [tooltip content=" fixed-length result of applying mathematical hash function to any volume of data. Hash is a one-way function: it is easy to get the result (also called hash) from the data, but impossible to get the data from the hash"] hash [/tooltip] - its unique identifier. The blocks always carrying a reference to the previous ones, a chain of blocks is formed. 



The first block ever created is called the Genesis block, i.e. block 0. The block 1 was created with the reference to the block 0, and so on. Block number is also called the block height (as if the blocks were built one above the other) and measures the distance to the Genesis block. The block n, whose header hash is mentioned in the header of the block n+1, is called the parent block, whereas the block n+1 is called the child block. 



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<h2>Forks </h2>



While a block can have only one parent, it could have several children - a temporary situation that appears when several miners simultaneously propose a new block to the network. This situation is called a fork, because the blockchain splits into several valid branches. 



In the majority of cases the forks are not intentional, but rather due to the nature of the consensus. It is theoretically possible though to create them intentionally in order to try and fraud the system and execute a double spending (even if such endeavour would require more than 51% of the network computational power). 



Some estimate that a 10 minutes interval between blocks is a compromise between the scalability (theoretical number of possible transactions per second) and the probability to have a fork. The shorter the block creation time, the more nodes have a chance to find themselves with candidate blocks at the same time. In the case of Bitcoin it is quite rare that a fork holds for more than two blocks. 



In order to secure the blockchain the miners have to find a <a href="https://d.center/explore/proof-of-work" class="ek-link">Proof of Work</a> before submitting a block to the network. The PoW process is such that anyone willing to rewrite the history and modify the data within the block n must redo the PoW of this block and of all others that follow, since they will contain references to the previous blocks. Such electricity spending cannot possibly be cost-effective. It is thus considered that beyond n+5 (the 5th confirmed block after n), the n  becomes near definitive. 



<h2>Merkle root</h2>



 The <a href="https://d.center/explore/bitcoin-wallets" class="ek-link">wallets </a>refer to the data within the blockchain in order to keep their balances and to initialize transactions. Therefore they have to maintain a copy of the whole blockchain at any moment. Full node wallets keep the entire blockchain, which makes them reliable, but also quite heavy and cumbersome. There is also another way of accessing the blockchain without downloading all of it - by using a piece of data called the Merkle root. This data sits within the header of every block and enables the usage of the so-called SVP wallets (SPV for Simplified Payment Verification). These wallets only download block headers, which makes them lighter and more user-friendly, however they have to connect to a full node wallet in order to function properly (see <a href="https://d.center/explore/bitcoin-network" class="ek-link">Bitcoin network</a>).

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Bitcoin is an assembly of&nbsp; technologies and principles that interact in a predefined manner, securing the whole system performance.&nbsp;So how does it work? 



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<a href="https://d.center/explore/keys-and-addresses" class="ek-link">Keys and addresses</a>. Bitcoin is a decentralized system without any trusted third party, which means that no one can dispose of coins except for their rightful owner. Such feature necessitates extensive security measures, and Bitcoin ensures them using a system of cryptographic keys and addresses. 



<a href="https://d.center/explore/bitcoin-wallets" class="ek-link">Wallets</a><a href="https://d.center/explore/bitcoin-wallets" class="ek-link"> </a>are programs capable of communicating with the Bitcoin network. They generate keys and addresses that allow sending and receiving bitcoins, and can reconstitute the bitcoin balance of a particular account by researching the blockchain. 



<a href="https://d.center/explore/bitcoin-transaction" class="ek-link">Transactions </a>are generated and sent by wallets. Bitcoin transactions have a simple structure called UTXO, and a limited coding language script, which ensure the system’s robustness. 



<a href="https://d.center/explore/bitcoin-network" class="ek-link">Bitcoin network</a> enjoys a Peer-to-Peer, or <a href="https://d.center/explore/p2p-network" class="ek-link">P2P</a>, architecture - its nodes communicate with each other without any central server. Network nodes run Bitcoin protocol to verify if a transaction is valid (the sender has enough coins on their account and their signatures are correct) and if a candidate block (set of confirmed transactions) sent by a miner is OK, then propagate them to the network. 



<a href="https://d.center/explore/bitcoin-consensus-and-mining" class="ek-link">Consensus </a>is needed in order to determine which node will add the next block to the blockchain and to guarantee that this block is not fraudulent. Bitcoin utilizes <a href="https://d.center/explore/proof-of-work" class="ek-link">Proof-of-Work</a> consensus, where nodes need to find a solution to a cryptographic problem, which necessitates a big amount of electricity and specific equipment. As a reward for such work a node gets to add a block and receives newly created bitcoins. Such “bitcoin extraction” activity is called mining and the nodes engaging in it - miners. Mining is the only way to create new bitcoins.



 The node who finds a PoW solution first broadcasts a new block to the network, where, if the block is validated by the network, other nodes start working on the following blocks. Each block having a cryptographic reference to the previous one, a <a href="https://d.center/explore/bitcoin-blockchain" class="ek-link">blockchain </a>is being formed.

To better understand how exactly Bitcoin works, it is interesting to look at each step of a transaction in bitcoin.



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<h2 class="wp-block-heading">Download wallet</h2>



<ul class="is-style-connected">
<li>Alice and Bob download their <a class="ek-link" href="https://d.center/explore/crypto-wallets">wallets </a>(programs capable of communicating with bitcoin network) that generate a pair of keys - private and public (see <a class="ek-link" href="https://d.center/explore/keys-and-addresses">Bitcoin keys and addresses)</a>.</li>
</ul>



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<h2 class="wp-block-heading">Initiate transaction</h2>



<ul class="is-style-connected">
<li>With the help of her wallet, Alice initiates a transaction of sending 0.5 coins to Bob, using his address derived from his public key. She signs the transaction with her private key and her wallet broadcasts <a href="https://d.center/explore/bitcoin-transaction" class="ek-link">Bitcoin transaction</a> through the <a href="https://d.center/explore/bitcoin-network" class="ek-link">Bitcoin network</a> of nodes (computers running Bitcoin protocol and keeping record of all transactions).</li>
</ul>



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<ul class="is-style-connected">
<li>By running the code a node verifies if Alice has enough coins on her account ( at some time in the past she must have received them ) and if she really was the one to initiate the transaction of 0.5 coins. If the transaction is valid, the node broadcasts it to its peers. Bob’s wallet receives notification about pending transaction.</li>
</ul>



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<h2 class="wp-block-heading">Mine the block</h2>



<ul class="is-style-connected">
<li>A mining node gathers valid transactions into a block of a certain size (as of now, Bitcoin block weight is of 4 MB, able to contain around 4000 transactions). In order to propose a candidate block that should be added to the previous one a mining node must comply with the <a href="https://d.center/explore/consensus-protocol" class="ek-link">Consensus protocol</a>. In case of Bitcoin it is called a Proof-of-Work (<a href="https://d.center/explore/proof-of-work" class="ek-link">PoW</a>). </li>



<li>PoW is basically a math puzzle that requires significant computational power to solve. The nature of the puzzle makes the “brute force” the only possible way to proceed, thus obliging nodes to invest into sophisticated equipment and pay heavy electricity bills. These expenses are, in a way, a gauge of node’s good intentions, as they make it economically stupid to sabotage the system. The difficulty of this work is adjusted so as to limit the rate at which new blocks can be generated by the network to one every 10 minutes. </li>
</ul>



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<ul class="is-style-connected">
<li>The first miner to find a Proof-of-Work is rewarded in newly created bitcoins, and that’s the only way to create new bitcoins. The reward is set to decrease geometrically, with a 50% reduction every 210’000 blocks, or approximately four years (as of now it’s 6.75 BTC). This system implies that the number of bitcoins in circulation will never exceed 21 million, the number that would be approached by the year 2140. Additionally, a miner is awarded the fees paid by users as incentives to include their transaction into a block. In the future, as the reward decreases, the fees will make up a much more important percentage of mining income (see <a class="ek-link" href="https://d.center/explore/mining-and-consensus">Bitcoin consensus and mining)</a>.</li>
</ul>



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<h2 class="wp-block-heading">Propagate to the blockchain</h2>



<ul class="is-style-connected">
<li>Once a mining node finds the PoW, it broadcasts the timestamped and signed block to other nodes, who verify its correctness and broadcast it to their peers. Mining nodes start working on creating the following block, mentioning the previous block’s unique identifier. Nodes always consider the longest chain to be the correct one (see <a href="https://d.center/explore/bitcoin-blockchain" class="ek-link">Bitcoin blockchain</a>). </li>
</ul>



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<ul class="is-style-connected">
<li>Bob receives 0.5 BTC from Alice. For important transactions it is recommended to wait until 6 following blocks are mined, to make sure that the transaction is included in the longest chain.</li>
</ul>



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Bitcoin blockchain is public and stores information about all transactions since the genesis block, allowing anyone to verify the transaction history. 



However, only account's address is visible, making Bitcoin a pseudonymous network.

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Bitcoin history

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Every software needs upgrades, but how do you implement them within a headless and decentralized system that is Bitcoin?



Blockchain governance is the process by which its operating rules (transaction and block verification, signatures techniques etc) are decided upon, implemented, and improved. In Bitcoin blockchain the governance is implemented through consensus between community members. It is considered an off-chain governance, as the process itself is not inscribed into the blockchain (see <a href="https://d.center/fr/explore/blockchain-governance" class="ek-link">Blockchain governance</a>).



 The original Bitcoin implementation (also called Satoshi client) was the first version of Bitcoin protocol, integrating a wallet. First supervised by Satoshi Nakamoto himself, the protocol was then entrusted to a team of developers led by Gavin Andersen, then Wladimir J. van der Laan; since the version 0.9.0 it took the name of Bitcoin core. As of today, Bitcoin core is by far the most popular “client”, even if other clients exist and in the past some of them could compete with Bitcoin Core. 



<h2>Who finances Bitcoin?</h2>



Bitcoin development is finance in a decentralised manner by any person interested in its security and evolution: tech companies (Blockstream), crypto exchanges (Kraken, Coinbase), personalities of the crypto world (Meltem Demirors of CoinShares, Jack Dorsey of Twitter, Michael Saylor of MicroStrategy), asset management companies (Fidelity Digital Assets)... Donations can be sent directly to the developers or to associations, such as MIT Media Lab’s Digital Currency initiative or Bitcoin Core Sponsorship Program.



<h2>BIP</h2>



When a person thinks that a certain protocol issue should be addressed, whether it’s correcting  a bug, adding or a new functionality or improving an existing one, they submit the idea or solution to the community. It can be a white paper or an email to <a href="mailto:bitcoin-dev@lists.linuxfoundation.org">bitcoin-dev@lists.linuxfoundation.org</a>. The ideas that make sense become Bitcoin Improvement Proposals, or BIPs; they are assigned a number and published on Github forum. The full list of BIPs can be consulted <a href="https://github.com/bitcoin/bips" class="ek-link">here</a>. 



BIPs implementation can take various forms and be really complex, even in cases when the majority of the community agrees on it. 



<h2>Implementing updates</h2>



If the codebase update is incompatible with the existing protocol (not forward-compatible), all nodes have to accept it at a certain point of time. Usually it happens when there’s a need to eliminate certain security risks or add a new functionality. Those who wish to continue implementing old rules will find themselves isolated from the rest of the network and will be de facto working on another blockchain. Such implementation is called a hard fork and it is a way to bring important changes to the protocol, as well as to give birth to new blockchains.



When a suggested update is compatible with the existing validation rules (forward-compatible), each node can choose for itself whether it adopts the update or not (even if after some time they would have to accept the update to better perform their task). Such implementation is called a soft fork.&nbsp;



Even if the majority of actors agree on a soft fork update, its implementation can be very complex, taking into account Bitcoin's decentralized nature. In the past several methods were used:



<ul><li>Miner Activated Soft Fork (BIP9), which measures miner support for soft forks on a rolling basis. Miners “signal” their support for a protocol by leaving extra information in the block header of the blocks they submit. If more than 95% of the successfully submitted blocks show support for the new rules over a period of time, the new protocol is activated. If not, it is rejected.</li><li>&nbsp;User Activated Soft Fork (UASF), by which a majority of the Bitcoin network signals that at a specified date (flag day) it will reject non-updated blocks by running a UASF full node. UASF contributed to a successful SegWit implementation in 2017, showing that the Bitcoin governance system is sufficiently decentralized to be able to adopt decisions that miners do not particularly support. Learn more on different actors of the network <a href="https://d.center/en/explore/bitcoin-network" class="ek-link">here</a>.</li></ul>







Even with different methods, implementation is still a complicated task, as shown by the debates around Taproot - a much expected protocol update desired by the majority of the Bitcoin community. At the time of writing the way of implementing it is still a subject of discussions, so in order to speed it up a proposal called <a href="https://www.mail-archive.com/bitcoin-dev@lists.linuxfoundation.org/msg09604.html" class="ek-link">Speedy Trial</a> was submitted on March 5, 2021. The idea of Speedy Trial is to start early (the nodes start to count blocks that implement the update soon after its release) and end early (if the threshold of 90% is not achieved within 3 months, the activation fails). If adopted, Speedy Trial method could be used for upcoming implementations. 



 



It is difficult to develop a decentralized protocol. Every update takes a lot of time, which potentially could have negative consequences. However it is paramount that every actor can participate in decision-making, ensuring Bitcoin independence and decentralization.

Bitcoinnn

Blockchain in use

Philosophy behind blockchain

Underlying technologies

Blockchain trilemma

Blockchain and DLT types

Bitcoin mechanism

Bitcoin Transaction

Bitcoin transaction inputs and outputs

Bitcoin implementations

Script

UTXO

Mainchain functions

Transaction inputs

Sidechain solutions

Cryptography

Transaction Fees

Keys and addresses

Private key

Public key

Adress

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Blockchain is a recent invention. It is still in early stages of its development, and yet a burgeoning new blockchain-related industry is already emerging. Improving the technology, finding new use cases, developing the ecosystem… and of course looking to change the world are some of these new endeavors.



This section is dedicated to exploring different facets of the blockchain and bringing answers to an array of questions one might have - from “Why do we need it” to “How does it work” or “What is it used for”. The structure of Explore descending from general concepts to specific notions, you are welcome to choose your own path according to your interests and go down the rabbit hole. 



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<h2><a href="https://d.center/explore/blockchain-philosophy" class="ek-link">Blockchain philosophy</a></h2>



Why are crypto enthusiasts so enthusiastic? Blockchain is not a trivial technology, but the one that has a potential to change the very way our societies operate. Every organization and every community rely on trusted third parties, responsible for storing and managing data, with all the related risks . Replacing these trusted third parties with a decentralized data handling mechanism would eliminate much of the system’s deficiencies, and that’s exactly what blockchain does. 



<h2><a href="https://d.center/explore/bitcoin" class="ek-link">Bitcoin</a></h2>



The very first implementation of the blockchain, Bitcoin was created to solve the deficiencies of the monetary system and replace the so-called fiat money (dependent on Central Banks) with cryptocurrency, a completely independent alternative that runs on a decentralized peer-to-peer network.&nbsp; 



<h2><a href="https://d.center/explore/blockchain-fundamentals" class="ek-link">Blockchain fundamentals</a></h2>



A blockchain is a collection of technologies and methods that allow gathering data into a ledger, which is stored and updated by the network’s participants (which anyone can become). Data handling is its main role, although it also allows embedding more complex programs and running them in a decentralized way.&nbsp; 



<h2><a href="https://d.center/explore/blockchain-in-practice" class="ek-link">Blockchain in practice</a></h2>



Most blockchain encounters today are about cryptocurrencies - Bitcoin and many others that have appeared since. However the understanding of the technology becoming increasingly subtle, other blockchain real-world use cases appear, notably with the development of decentralized applications, or Dapps. A developed ecosystem makes these functionalities readily available and opens up previously restricted-access industries, such as finance.&nbsp;&nbsp; 



<h2><a href="https://d.center/explore/crypto-regulation" class="ek-link">Crypto regulation</a></h2>



Blockchain and its products are becoming an increasingly important part of our lives and our economies, which inevitably attracts the regulators’ attention. This is not a bad thing, though, for the right laws can support the technology and protect its users against related scams. Depending on a country however the attitude varies greatly, from progressive to autocratic. 



<h2>Beginner’s path </h2>



If you do not yet have a clear idea of what it is you would like to explore, let us suggest you a suite of 8 articles that will smoothly introduce you to the world of cryptoassets and Bitcoin in particular: it will help you to understand what it is used for, how it works and some necessary tools allowing to buy some of it.



<a href="https://d.center/explore/blockchain-philosophy" class="ek-link">Blockchain philosophy</a>



<a href="https://d.center/explore/bitcoin" class="ek-link">Bitcoin</a>



<a href="https://d.center/explore/how-does-bitcoin-work" class="ek-link">How does Bitcoin work</a>



<a href="https://d.center/explore/bitcoin-mechanism " class="ek-link">Bitcoin mechanism</a>



<a href="https://d.center/explore/blockchain-in-practice" class="ek-link">Blockchain in practice</a>



<a href="https://d.center/explore/blockhain-ecosystem" class="ek-link">Blockchain ecosystem</a>



<a href="https://d.center/explore/crypto-wallets" class="ek-link">Crypto wallets</a>



<a href="https://d.center/explore/crypto-exchanges " class="ek-link">Crypto exchanges</a>

What is Bitcoin and why it could be a valuable alternative to our usual currencies such as dollars and euros?



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<h2 class="wp-block-heading">Bitcoin and bitcoin</h2>



Bitcoin is both the blockchain and the cryptocurrency that exists on it. To distinguish the two, Bitcoin as the blockchain is usually written with a capital B. 



The basis of the technology were first outlined in Satoshi Nakamoto's (pseudonyme) <a href="https://d.center/en/explore/bitcoin-a-peer-to-peer-electronic-cash-system" class="ek-link">White Paper</a> published in 2008 and titled "A Peer-to-Peer Electronic Cash System". 



It was not the first try to create a digital currency, but it was the first to succeed in solving all the intricate problems that led to previous attempts’ failures. Satoshi Nakamoto exploited decades of research, in particular in the fields of cryptography and distributed systems, and brilliantly brought them together to create a fast, secure, independent, and borderless digital money.



<h3 class="wp-block-heading">Bitcoin consists of:</h3>



<ul>
<li>Bitcoin protocol - a set of rules and algorithms that enable bitcoin issuance and transactions validation via&nbsp;network consensus (a way to ensure that network participants are well-intentioned and will update transactions ledger fairly; Bitcoin consensus is called a <a href="https://d.center/explore/proof-of-work" class="ek-link">Proof-of-Work</a>)</li>



<li>decentralized <a href="https://d.center/explore/p2p-network" class="ek-link">peer-to-peer network</a><a href="https://d.center/explore/p2p-network" class="ek-link"> </a>to run the Bitcoin protocol. Without any central server, a P2P network is composed of computers with equal rights that verify transactions and, if they wish, participate in bitcoin issuance and transactions’ recording.</li>
</ul>



Running the Bitcoin protocol results in a public distributed ledger called the blockchain, where all the transactions are stored. Everyone can consult the blockchain and its transactions from the Genesis block up to now.



Bitcoins are issued according to the protocol as a reward for maintaining the network, and their transfer is carried out&nbsp; without intermediaries and centralized authorities. This means that, unlike 
 fiat 
 fiduciary money with no intrinsic value backed by and dependent on the government (e.g. dollars or euros) 
 currencies, Bitcoin does not depend on the government or banks to issue money or to settle and validate transactions. 



The only thing that gives control over bitcoins is the private key associated with every Bitcoin address and available exlusively to its owner.



<h2 class="wp-block-heading">Bitcoin alternative to fiat money</h2>



Store of value. No single entity could ever change Bitcoin code: it is stored and run on the network nodes - literally thousands of independent computers all over the world. This ensures that the code is law, and the rules embedded into code won’t change unless the majority of the network decides so. 



This stability is particularly important when it comes to the emission rules: bitcoin emission rate is predefined, with the supply divided by two every 4 years, meaning that there won’t ever be more than 21 million bitcoins. In the world where Central Banks can print as much fiat money as they wish, Bitcoin represents a remarkable store of value.



Free use. Bitcoin is also public and open source, allowing anyone to join, participate or use it. Anyone can open a Bitcoin wallet and send/receive bitcoins, without any approval from whatever organization. 



This is a significant improvement compared to the red tape of the banking system, not to mention a precious access to the world's finance for the unbanked. Furthermore, in the authoritarian countries where access to money is often used as a tool of repression, Bitcoin’s accessibility is vital. 



<h2 class="wp-block-heading">Bitcoin updates and developments</h2>



The rules that define Bitcoin protocol were first introduced by Satoshi Nakamoto, but as every computer program, they have to be regularly revised and updated, in order to reinforce the protocol security and introduce new functionalities. The way such updates are agreed upon is usually referred to as the <a href="https://d.center/explore/bitcoin-governance" class="ek-link">governance</a>, and in Bitcoin case its community plays a critical role.&nbsp;



Beyond the Bitcoin protocol itself, there have been numerous developments of the so-called layer 2, allowing&nbsp; to execute transactions off the mainchain. Such solutions usually aim to improve Bitcoin’s performance or introduce new functionalities.



Bitcoin's most popular layer-2 solution is Lightning Network, which increases dramatically its transaciton throughput and decreases network fees.