<aside> <img src="/icons/flash_gray.svg" alt="/icons/flash_gray.svg" width="40px" /> The Bitcoin Rabbit Hole: 5/10 ⚡ Yes it's technical, but once you understand how Bitcoin works you realize how powerful it really is.

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You use credit cards every day, but you probably don’t know how credit card processing works. The same can be said for Bitcoin, although the more you understand about how Bitcoin works the more confident you can be safely storing and using your bitcoin.

At a high level, here’s how Bitcoin works:

• Any computer running Bitcoin software joins a peer-to-peer network of other computers running Bitcoin software. These connected computers are called nodes.
• Nodes can create, sign, verify and share bitcoin transaction information with one another.
• Each node also maintains a database (aka the blockchain) of every transaction that’s ever happened since the day Satoshi fired up his first node.
• New transactions are added to the blockchain in batches (aka blocks) every 10 minutes by one lucky node on the network via a lottery.
• Special mining nodes can create lottery tickets by attempting to guess a difficult number (aka mining).
• Mining isn’t free. Nodes burn a lot of electricity guessing this number and electricity (typically) costs money.
• When a miner guesses a winning number, it creates a new block by taking all the transactions it’s heard about since the last block and adding them to the blockchain.
• As a reward, the miner receives all the transaction fees included in the block + a special transaction called the block reward from no-one to themselves for 6.25 bitcoin.
• The miner broadcasts the block + the winning lottery number to all the other nodes on the network for verification.
• The nodes verify the miner’s winning number and if it’s correct, add the new block to their copy of the blockchain and move onto guessing the next number.
• This cycle continues roughly every 10 minutes for all of time…

Pretty cool right? Let’s dig a little deeper into some of these topics.

Nodes

At the time of writing this there are roughly 16k nodes on the Bitcoin network. There are two different types of Bitcoin nodes:

1. Validating nodes – Create, sign, verify, share and store transaction information