Bitcoin Lovers

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.

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.

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