Six chapters
The field guide.
Each chapter explains one mechanism and the trade-off it creates. Read them in order, or jump to the chapter you need.
Chapter 1
The ledger: a list everyone can check.
Bitcoin's record is an ordered list of transfers. Each entry says that a set of coins moves to a new address and carries a signature proving the sender controls them.
Every full node keeps its own copy and checks each new entry against the rules before accepting it. Because the copies are checked independently, changing the record would mean persuading the network, not one administrator.
Two design choices make this workable. The rules are published openly, so anyone can read them. And the copies are compared constantly, so a disagreement between nodes surfaces quickly.
Chapter 2
Keys, addresses and signatures.
A wallet creates a private key, which is a secret number, and derives a public key and an address from it. The address is what you give to someone who wants to send you coins, and it is safe to share.
A signature proves that the spender knows the private key without revealing it. Nodes check each signature against the public key recorded with the coins. No password is sent and no server approves the transfer.
Store your recovery phrase offline. Never type it into a website or send it to anyone. Anyone who has it can take the coins, and anyone who asks for it is attempting theft.
Chapter 3
Blocks and proof of work.
Transfers waiting to be recorded sit in a pool that each node keeps for itself. Miners pick from that pool, bundle transfers into a block, and search for a block fingerprint that meets a difficulty target. That search is proof of work.
Each block includes the fingerprint of the block before it. Change one transfer in an old block and the fingerprint changes, so every later block no longer links up. To hide the change, an attacker must redo the work for that block and every block after it.
How a block is added
Nodes collect valid transfers from the pool.
A miner assembles them with a link to the latest block.
The miner searches for a fingerprint below the current target.
Other nodes check the work and the transfers, then build on the new block.
The difficulty target is adjusted every 2,016 blocks so that blocks arrive about every ten minutes on average.
Chapter 4
Issuance and halvings.
The block reward is the only way new coins are created. The protocol sets it and cuts it in half at fixed block heights, roughly every four years.
| Era and block heights | Reward per block | Coins in the era |
|---|---|---|
| 1: blocks 0 to 209,999 | 50 | 10,500,000 |
| 2: blocks 210,000 to 419,999 | 25 | 5,250,000 |
| 3: blocks 420,000 to 629,999 | 12.5 | 2,625,000 |
| 4: blocks 630,000 to 839,999 | 6.25 | 1,312,500 |
| 5: blocks 840,000 to 1,049,999 | 3.125 | 656,250 |
Together the eras add up to just under 21 million coins. The reward keeps halving after the fifth era, so the total approaches that figure without exceeding it.
A smaller reward makes fees a larger share of what miners earn, which is one reason the fee market matters more over time.
Chapter 5
Fees and confirmations.
Senders attach a fee to each transfer. Fees are measured against the size of the transfer in virtual bytes, and expressed as a fee rate in satoshis per virtual byte.
Blocks have limited room. When many transfers compete for it, miners tend to fill blocks with the transfers that pay the highest fee rates. A transfer that offers too little can wait in the pool for a long time.
A confirmation is a block added on top of the block that holds your transfer. The more blocks sit on top, the more work an attacker would need to reverse it. Six confirmations is a common rule of thumb for larger payments. It is a convention, not a guarantee.
Chapter 6
What goes wrong.
Most losses come from a small set of mistakes. Knowing them is the cheapest protection available.
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Lost keys
If the private key or recovery phrase is lost, no one can recover the coins. This is the most common failure, and the least discussed.
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Irreversible transfers
A transfer sent to the wrong address is final. There is no chargeback process in the protocol and no support desk that can undo it.
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Impersonation
People pose as wallet support, exchanges and public figures to ask for keys or payments. Legitimate software never asks for a recovery phrase.
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Price movement
Prices swing, sometimes sharply. This guide does not predict prices and does not say when to buy or sell.
This guide describes how bitcoin works. It is not financial, legal, or medical advice. For decisions about money, consult a licensed professional in your jurisdiction.