Bitcoin Under the Hood:
The Complete Guide
From the Blockchain ledger to the Halving economics. A comprehensive look at the technology that powers the world's first digital scarcity.
1. The Public Ledger (Blockchain)
Imagine a Google Sheet that everyone can read, but no one can delete. That's the Blockchain.
Every transaction ever made is recorded in "blocks" that are chained together. If you try to cheat and change a past record, the math doesn't add up, and the network rejects it.
2. Proof of Work (Mining)
Mining isn't about finding coins in the ground. It's about securing the network.
Computers around the world compete to solve a complex math puzzle (like a digital Sudoku). The winner gets to write the next page of the ledger and is rewarded with Bitcoin. This energy cost makes it incredibly expensive to attack the network.
3. Keys & Wallets
Your wallet doesn't store Bitcoin. It stores Keys.
- 1
Public Key: Like your email address. You share this to receive money.
- 2
Private Key: Like your password. You use this to sign transactions. Never share this.
PUBLIC ADDRESS (Safe to share)
bc1qxy2kgdygjrsqtzq2n0yrf2493p83kkfjhx0wlh
PRIVATE KEY (Keep Secret)
L5W2Ny6...HIDDEN...Kq8
4. The Halving
Bitcoin has a fixed supply cap of 21 million. New coins are issued to miners as rewards.
Every 210,000 blocks (roughly 4 years), this reward is cut in half. This creates a deflationary pressure, making Bitcoin scarcer over time, unlike fiat currencies which can be printed endlessly.
5. Difficulty Adjustment
To ensure blocks are found every 10 minutes on average, the network adjusts the difficulty of the mining puzzle.
If more miners join (more computing power), the puzzle gets harder. If miners leave, it gets easier. This self-regulating mechanism keeps the network stable regardless of external factors.
6. Forks (Soft & Hard)
Sometimes the community disagrees on rules. This leads to a "Fork".
Soft Fork: A backward-compatible upgrade. Old nodes can still process new blocks.
Hard Fork: A permanent divergence. A new coin is created (e.g., Bitcoin Cash).
7. Taproot & Ordinals
Bitcoin isn't stagnant. The 2021 Taproot upgrade improved privacy and efficiency.
More recently, Ordinals allowed users to inscribe data (images, text) directly onto individual Satoshis, effectively creating NFTs on Bitcoin.
Taproot
Schnorr Signatures
Smart Contracts
Ordinals
Inscriptions
BRC-20 Tokens
Why It Matters
Bitcoin solves the "Double Spend" problem without needing a bank. It is the first truly scarce digital asset.
Read More Insights