Bitcoin wallets and addresses
A user can have one or more bitcoin addresses from which bitcoins are
sent or received using either a website or downloaded software often
called a "wallet" like a digital wallet.
Users can obtain new bitcoin addresses as needed. Many bitcoin services
provide addresses tied to a user's individual account to hold funds on
the user's behalf.
Specifically, a bitcoin address is a cryptographic public key
—human-readable
strings of numbers and letters around 33 characters in length,
beginning with the digit 1 or 3, as in the example of
175tWpb8K1S7NmH4Zx6rewF9WQrcZv245W.
The matching private key is often stored in a digital wallet or mobile device and protected by a password or other means of authentication. Each bitcoin transaction is signed by the private key of the user initiating the transaction.
Various vendors offer banknotes and coins
denominated in bitcoins; what is sold is really a bitcoin private key
as part of the coin or banknote. Usually, a seal has to be broken to
access the key, while the receiving address remains visible on the
outside so that the balance can be verified.
Payment network and mining
The Bitcoin network protocol operates to provide solutions to the
problems associated with creating a decentralized currency and a
peer-to-peer payment network. Key among them is the use of a blockchain
to achieve consensus and to solve the double-spending problem.
A bitcoin is defined by a chain of digitally-signed transactions that began with its creation as a block reward through bitcoin mining.
Each owner transfers bitcoins to the next by digitally signing them
over to the next owner in a Bitcoin transaction. A payee can then verify
each previous transaction to verify the chain of ownership.
The network timestamps
transactions by including them in blocks that form an ongoing chain
called the blockchain. Such blocks cannot be changed without redoing the
work
that was required to create each block since the modified block. The
longest chain serves not only as proof of the sequence of events but
also records that this sequence of events was verified by a majority of
the Bitcoin network's computing power. As long as a majority of
computing power is controlled by nodes that are not cooperating to
attack the network, they will generate the longest chain of records and
outpace attackers.
The network itself requires minimal structure to share transactions.
Messages are broadcast on a best effort basis, and nodes can leave and
rejoin the network at will. Upon reconnection, a node will download and
verify new blocks from other nodes to complete its local copy of the
blockchain.
Source : Wikipedia
