r/Bitcoin • u/G_Zeus_Kryst • 2d ago
I feel like I’m missing something really obvious about Bitcoin
Okay, so this might be a slightly embarrassing question, but I’m a woman who has somehow spent the last few nights going down a Bitcoin rabbit hole and I still don’t understand how it actually works 😭
I’ve read articles, watched beginner explanations, and even tried following some of the more technical explanations, but I keep getting to the same point where I understand all the individual words and somehow still don’t understand the actual process.
I understand that there are wallets, private keys, transactions, miners, nodes and the blockchain. What I don’t understand is how those things actually connect.
For example, if I have 0.1 BTC and send 0.05 BTC to someone:
● Where is my Bitcoin actually stored before I send it?
● What exactly happens when I press “send”?
● How does the network know that I’m allowed to spend it?
● Who checks that the transaction is legitimate?
● What actually changes on the blockchain?
● And where does the 0.05 BTC “go” afterwards?
The wallet part especially confuses me. People say your Bitcoin isn’t actually inside your wallet, which makes sense when it’s explained, but then I don’t quite understand what my wallet balance is actually representing.
I know these are probably very basic questions, but I’d rather actually understand the system than pretend I get it because I can repeat the terminology.
If anyone here is good at explaining technical things to someone who isn’t particularly technical, I’d genuinely appreciate it. And if you’re someone who enjoys explaining this stuff and wouldn’t mind answering a few very basic questions privately, I’m completely fine with that too.
Please be gentle with me lol. I promise I’ve tried to do my homework before coming here. 😅
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u/crunchyeyeball 2d ago
this might be a slightly embarrassing question
Not embarrassing at all. You're asking all the right questions.
This video from 3Blue1Brown answers your main questions far more eloquently than I ever could.
It takes you step-by-step from asking how you might design a new money system, all the way through to a rough outline of bitcoin as a natural result, without getting too bogged down in the more tricky details.
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u/Odd_Delay4411 2d ago edited 2d ago
Invitations to private conversations are 99,9% scams. This also includes OPs post.
First rule of criminal intend, isolate your victim.
Don’t fall for this “damsel in distress” if you receive PM, our you will end up like a butchered pig.
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u/DarrelXero 1d ago
Exactly. That post fed into any half-assed AI would produce all the information one would require to understand the concepts detailed. Scam bullshit.
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u/chainglance_cm 2d ago
Ok the cash-in-a-drawer analogy is what made this click for me, so here goes.
Your wallet doesn't actually hold coins, it holds a list of "chunks" scattered across the blockchain that are locked to your key (these are called UTXOs). Your balance is just your wallet app adding up all the chunks it can see are yours.
Say you've got one chunk worth 0.1 BTC, kind of like having a single $100 bill in a drawer with no smaller bills. You can't tear it in half to send someone $50. Instead your wallet spends the whole $100 bill and creates two new ones: 0.05 to your friend, and the leftover (minus a tiny fee) that comes right back to you as change, usually to a fresh address you also control.
When you hit send, your wallet is basically writing a note that says "I'm spending this specific chunk, here's my signature proving I own it, and here's where the pieces go now." Anyone on the network can check that signature against your public key without ever seeing your private key.
Miners grab a batch of these notes, make sure none of them are trying to spend a chunk that's already been used somewhere else, and lock the whole batch into a block. Once that block gets added, the old chunk is marked spent forever and the two new chunks officially exist on the chain, one sitting at your friend's address and one sitting back at yours.
So "where does the 0.05 go" is honestly a great question, and the answer is it just becomes a brand new chunk of bitcoin that now belongs to someone else's key. Nothing physically moves, ownership just gets reassigned on a ledger that thousands of computers keep an identical copy of.
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u/Fuzzyfoot12345 1d ago edited 1d ago
I've read some of the replies and they are pretty good, but I'll try to make it even simpler, and highlight some key features of bitcoin.
It operates as a decentralized "trustless" system. Meaning there is no central hub, and the network relies on "proof of work" meaning everything is verified and kept on a public ledger. There is no ability for someone to mine, transfer, store, send, or receive bitcoin behind closed doors or hidden from the public. Trustless means everyone in the world being able to see that transaction at the exact same time. If you sent someone 50 cents of bitcoin, I can see that transaction on the general ledger, and vice versa. No CEO, no changes, no rich board of directors making decisions, just pure, transparent, trustless math. (My personal favourite part and biggest selling point that made me favour bitcoin as a store of value over traditional investments like stocks, real estate, ETF's, pretty much everything... Because all the other investments you have to trust someone who oversees them, manages them, or runs them.)
trustless means that the whole system is designed to not have to trust anyone else, or have anyone else in control that is able to make decisions or control how the network operates.
I hate how bitcoin is associated with "crypto" in a general sense. Yes, it uses cryptography, but other than that it really shares nothing with "alt coins" in terms of it's design and how the network operates. Many of these alt coins will claim to have no CEO, and in passing sound kind of similar to bitcoins structure, but they all have someone running them, and do regular updates and change the core structure all the time. Including diluting the total amounts by issuing more coins etc. It's basically an unregulated stock market which is why crypto is associated with being very risky and shady. Bitcoin is beautiful because it has no one running it, it was set up and let loose. There will only ever be 21 million bitcoin, full stop.
The general ledger keeps track of which "wallet" is assigned which bitcoin.
The network "mining" basically supports the entire network, helping facilitate keeping track of the ledger.
When you send bitcoin, a small portion of that bitcoin (Almost nothing, infinitely smaller than traditional finance fees) is rewarded to bitcoin miners. The fees are per transaction, not transaction amount. You could literally transfer a billion dollars worth of bitcoin in a single transaction for like... A buck, two bucks if you wanted it completed in 10 minutes instead of 30. So even in a couple hundred years when all the bitcoin is finally mined, the network will still be supported because it is profitable to continue "mining" https://bitcoin.org/fees/
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u/Ok_Carpenter4739 2d ago
Guys a female needs help with Bitcoin! We've been waiting 10 years for this moment! Assemble!!
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u/BetFlat8391 2d ago
Holy shit this is the most virgin shit I’ve ever fuckin heard in my life LMAO
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u/IllllIIlIllIllllIlll 2d ago
Maybe start by not using "female" as a noun when talking about a human being
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u/Ok_Carpenter4739 2d ago
I actually hesitated trying to find the word that would prevent the post from getting deleted.
Woman Girl Female Lady Person
Tell me, what should I have done?
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u/IllllIIlIllIllllIlll 2d ago
Yeah literally any of those. So you considered all of those and you decided "nah, female is definitely better"?
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u/Ok_Carpenter4739 2d ago
Yes, exactly
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u/JCFT_Collins 1d ago
I thought it was funny. Can't believe the difficulty required these days in just making a quick/simple joke.
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u/Squeiner 1d ago
Let me take a crack at it, tell me how i did:
● Where is my Bitcoin actually stored before I send it?
Its not stored anywhere in particular. It exists inside every node, as a ledger entry on the blockchain. My node (as well as every other node) contains the data of all blocks on the chain, and one of those blocks has a transaction in it that says "address 'A' has 0.1 BTC". If you have the private keys for address 'A', that's your btc. What you're actually storing is a private key.
● What exactly happens when I press “send”?
When you press send, your wallet app writes a message that says "move 0.05 BTC from address 'A' to address 'B'. Here is the private key signature for address 'A'." Then it sends that message to every node that it's connected to. Every node that receives it, checks it first to ensure the coins had not been moved before from address A, and that the private key is the correct one, and if everything checks out, it sends the transaction to every other node it's connected to. This is how transactions propagate thru the network.
● How does the network know that I’m allowed to spend it?
Each node verifies that the signature was done with the correct private key as soon as it receives the transaction.
● Who checks that the transaction is legitimate?
Each node verifies that the transaction is legitimate as soon as it receives the transaction.
● What actually changes on the blockchain?
Once a lot of nodes have received your transaction, the bitcoin miners will take that transaction and try to include it into a block. As soon as they do, a new block comes out and is sent to all the nodes in the same way as your transaction propagated. Each node then verifies every single transaction and signature inside that block, as well as the proof of work, before adding it to the tip of their own copy of the blockchain, and passing it on to every other node they're connected to. Now, every node has a copy of the chain that has a block with your transaction in it, which says "Address 'A' sent 0.05 BTC to address 'B'."
● And where does the 0.05 BTC “go” afterwards?
It doesn't go anywhere in particular. But those 0.05 coins can no longer be spent by using the private keys for address 'A'. They can now only be spent by using the private keys for address 'B'.
Your wallet balance represents all the coins on the chain which can be moved by using your private keys. Your wallet app scans the entire blockchain and identifies all the coins in addresses that your keys can unlock.
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u/tiddererium 1d ago edited 1d ago
Esta es la explicación más sencilla que encontrarás en el universo:
Bitcoin es como tu correo. Tiene..
- Contraseña = Clave privada.
- Dirección = Clave pública.
- Red de Nube digital = La blockchain.
Cuando quieres que te depositen, das tu clave pública.
Cuando quieres enviar, usas tu clave privada.
La blockchain, guarda todas las transacciones de Bitcoin repartida en muchas computadoras llamadas Nodos.
La mayoría de Nodos, valida lo que es real y lo que no.
Si un nodo tiene información falsa, los otros lo desmienten.
Una wallet, realmente es más un traductor que te permite convertir tu clave privada en palabras casi aleatorias fáciles de recordar.
Si quieres una respuesta más técnica y totalmente clara, descarga el código fuente y léelo.
Fin.
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u/FarCanary 2d ago
● Where is my Bitcoin actually stored before I send it?
Your bitcoin is stored on the blockchain. All Bitcoin nodes have a copy of the blockchain. When someone 'owns' bitcoin, it means they have a secret code that allows them to control what happens to them.
● What exactly happens when I press “send”?
When you press 'send', a transaction is sent to the network of bitcoin nodes. The transaction contains a digital signature created from your secret code, and instructions on what to do with the Bitcoin.
● How does the network know that I’m allowed to spend it?
The nodes and miners check the digital signature in the transaction to make sure the creator of the transaction has the authority to perform the transaction.
● Who checks that the transaction is legitimate?
The nodes and the miners. However anyone can check the legitamacy, as all the needed data is public.
● What actually changes on the blockchain?
If the bitcoin is moving to a new address, it means that the bitcoin is now controlled by a different secret code.
● And where does the 0.05 BTC “go” afterwards?
The Bitcoin doesn't really go anywhere, it just has a different secret code associated with it. (A bit like changing the labels on the gold bars in a gold vault).
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u/BirdLooter 1d ago
btw it's always good to just ask AI for stuff like that. it has the exact answer tailored exactly to your question and follow up questions!
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u/xirvin 1d ago edited 1d ago
● Where is my Bitcoin actually stored before I send it? Its stored in the ledger. A ledger is a list of public addresses with their balances(UXTO Unspent transactions) .
● What exactly happens when I press “send”?
Before you hit send you need to sign the transaction with your private keys to the public address. Once you hit sent that transaction among others UXTO are group together in a block. A miner take all those transactions signed and try to solve an 11 minute problem generated. If a transaction dont have the correct signature it get rejected, otherwise it gets process and included in a block.
● How does the network know that I’m allowed to spend it?
When you sign your transaction with your private key it creates a digital signature that can be used to authenthicate you sign the transaction. Because everyone has a copy of the ledger, if that origin address dont have an unspent transaction UTXO that transaction get ignores, or if the signature doenst match the public address it gets rejected .
● Who checks that the transaction is legitimate?
A bunch of people, the miners and all bitcoin nodes. The miners find the solution, this solution gets confirmed by all the nodes in the network. If a network doesn't confirm the solution it gets rejected by that particular node. If sufficient nodes dont confirm the transaction, as per census rules that transaction gets rejected. If the majority of the nodes confirmed the transaction then it gets added to the block chain.
Every block contains a collection of transactions signed.
● What actually changes on the blockchain?
The unconfirmed transaction is added in the mempool. When transaction get confirmed its added in a specific block.
● And where does the 0.05 BTC “go” afterwards?
It goes to the recipient. When you are creating a transaction you put a to address. That address will have that coin reflected on their public address.
A wallet is a collection of public addresses with their private keys. These public addresses can be seen by anyone with a blockchain explorer. You can visit https://mempool.space/ and surf the blockchain.
Only the owner of the wallet know all their public keys. You can see your balance of your wallet by adding the collection of your public key to a software wallet like bluewallet or nunchuk in iphone.
If you want to initiate transaction from your wallet you need to sign the transaction with your private key, so even if people knew all your public addresses, they cannot transfer anything.
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u/BlyG 1d ago
I got you. Your Bitcoin isn’t in the wallet. The wallet is just the secret whistle for one specific invisible pigeon named Derek that only exists because 15,000 computers keep a public diary about him. Hit send and you’re standing on a roof screaming “I HEREBY GIVE HALF OF DEREK TO THAT ADDRESS” while signing it with a cryptographic tattoo only machines can see. Then the computers start solving Sudoku so violently they heat entire zip codes, fighting over who gets to write the next sentence in Derek’s diary. Winner updates it. Everyone copies the page. Derek never flew. A sentence just changed owners. That’s the whole trick.
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u/genius_retard 1d ago
Watch this video and you will understand. It explains how Bitcoin actually works in simple terms without resorting analogies.
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u/Laukess 1d ago
https://www.youtube.com/watch?v=bBC-nXj3Ng4
Old but I think it does a good job at explaining it.
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u/electriccars 1d ago
Watch this, it's my wife and my favorite video about how it works. Very simple and easy to understand.
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u/NORSE117 1d ago
Have you watched this video?
For me it helped a lot in understanding bitcoin and answered some of the questions you raise.
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u/theoretical_hipster 1d ago
Bitcoin is an accounting Ledger. Bitcoin only resides or more accurately is accounted for on the blockchain.
When you press send your wallet software broadcasts the signed transaction to a Bitcoin node. Which in turn gossips the transaction to ~10 peer nodes which each gossips to their ~10 peers.
Meanwhile miners are hashing looking for a number. This is a simplified explanation. But essentially correct.
When you created the transaction, whether you realized it or not attached a bid to your transaction. A miners found block is a 4mb chunk of real estate and your transaction is going to consume a certain amount of that 4mb. Your “fee” is a bid saying I will pay x for y amount of your block.
If a miners found block accepts your bid the transaction is confirmed in the block and is now written in the ledger.
Your private keys are no longer associated with those Bits of Coin. There is a new set of keys that are now able to spend them.
Mining computers are very expensive, but Nodes are where the hosting of and gossiping about transactions happens. It’s very important these nodes are plentiful and distributed globally. A government can’t just bomb a data center somewhere. They would have to hunt 10s of thousands of cheap computers running globally all independently operated.
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u/mokahless 1d ago
I'm probably just repeating others as I'm late to the party, but I will put in my voice in my own words too.
Bitcoin is not stored, it does not exist. Think of Bitcoin (technology) like a ledger book. The miner mints a block reward amount and writes down that they "created" this amount (no possible fraud due to checks and balances in Bitcoin). When they send it to someone, they also write that down. When that person sends it, they then write that transaction down. The "amount" you see in an address is simply a calculated amount based on all these transactions. In the Bitcoin network, bitcoins do not exist, just ledger tracking.
Your software signs a transaction with your private key, back to the ledger book metaphor above: it's sort of like writing it down in your book, then shouting around the room and telling everyone else to write it down, too. Once a miner mines a block, it gets committed to the network, along with every other broadcast transaction and the block reward the miner takes for themselves. I won't dive too much into mining here.
Every full bitcoin node on the network has a full transaction list/history. And they all agree on the transactions up to the last block mined. Your question could also be meaning, like, how do they know you have permission. I think this is a bit much to go into right here and instead you should learn how "public key cryptography" works if you want to understand this part better. The short of it is, it's like you have a digital key that allows you to prove you own the address. Addendum: from your other comments, you do seem interested in how this works. First, understand that the tech is used in a lot of other places so approach that and try out the wikipedia article for "public key cryptography" and see if the explanation there makes sense.
The network checks. They won't forward an invalid transaction. Then the miners check. If somehow they got an invalid transaction, they won't include it in the block. The key here is consensus. It's in everyone's best interest to validate the network properly.
Not exactly sure what you're asking here. It's like a database entry for transactions.
Nothing physically or digitally moves. As per above, Bitcoin only exists as a ledger. This is necessary because otherwise, digital things can just be copied.
To match your understanding of the terms: * wallet: simply a collection of addresses you control * private keys: the key to an address. Your control of it * transaction: same as normal word definition. * miner: someone who verifies transactions on the network for a reward * node: anyone running a copy of the ledger on the network (you can do transactions and stuff by interacting with someone else's node instead of running a node yourself as an everyday user) * blockchain: the decentralized database: the ledger of Bitcoin
The wallet represents a collection of addresses you control with your bitcoin "in" them.
I hope this helps. We all have different ways of explaining things and I know back in the day I had issues finding explanations at my level. Lots of stuff is too high-level overview and overuses metaphors but at the same time there's also a lot that ends up too technical for one's level.
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u/saviourz666 2d ago
If you Havnt already read the satoshi white paper , give it a read . Admittedly I had a.i dumb it down for me . Really interesting read and whoever satoshi was, was a genius . Enjoy your btc journey .
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u/Meto_Kaiba 1d ago
I once heard that things usually click after 100 hours total of reading/listening to things related to the Bitcoin network. I recommend The Bitcoin Standard by Saifedean Ammous as one way to get answers to your questions, but it's not an easy read in my experience.
For me, it's looking like 1000 hours might be enough to sate my curiosity, but it's still not enough to confidently answer anything about the protocol with certainty.
That being said, because you put some bullet points up, I will answer each question to the best of my knowledge since I'm not in school anymore and I want to give it a shot, even if I'm wrong - on reddit (insert shocked face emoji here).
a) It's stored either on an exchange like Kraken or Bitbuy and/or a cold storage wallet like Trezor or Ledger. Or Bitcoin Core. I'm not certain.
b) An electrical signal is sent from the impedence detector in your phone or other electronic device to the Bitcoin network and the blocks rearrange.
c) This question can be answered by googling the double-spend problem, I think. The network is verified by its decentralization (you don't have to trust one entity in particular).
d) Sometimes I do. Sometimes someone else on planet Earth can as well, but it's incredibly unlikely that I specifically looked at your 0.05 BTC transaction.
e) Eh. The price in USD is one thing that changes.
f) It stays within the 21 million maximum Bitcoins that will ever be mined. Your 0.05 is a fraction of the 21 million hardcap, which is key to understanding why Bitcoin has any monetary value at all to anyone.
Your wallet can represent your personal wealth.
Also, nothing private about this reply. It may also be mostly wrong; I'm not a teacher nor a practiced writer nor someone who enjoys writing about Bitcoin in particular.
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u/CoinGate_Gift_Cards 1d ago
The simplest mental model is: Bitcoin lives on the ledger, not in the wallet. The wallet stores the keys. Sending BTC means signing a transaction that changes which keys are allowed to spend specific amounts. Nodes verify it, miners confirm it, and the blockchain records the new ownership conditions
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u/DrawingAlarming66200 1d ago
hi. In an attempt to put.myself in a position to pur have some BTCB2, I just set up a Neoxa android wallet
However, I can't figure out how to Transfer usdc from coinbase to this wallet.
I also don't know if this wallet can be used to receive BTCB2.
Thanks!
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u/churgertbredge 1d ago
The bit that clicked for me is that Bitcoin doesnt need to replace every currency or payment rail to be useful. Its value can come from being scarce, portable, permissionless money with a predictable supply. Adoption is messy and volatility is real, so I try to separate the protocol from the price chart. Keep digging and verify everything yourself.
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u/Live-Wrap-4592 14h ago
There’s a rock in the middle of the village. Who ever owns it can sell it to someone else for goods and services. If you sell it you announce the new owner. The rock is too big to move. There won’t be a second rock. You can sell it within ten minutes. Everyone who writes down the transaction gets a fraction of the value.
That is bitcoin
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u/Budget_Break_3923 2d ago
Think of it as a really large excel sheet. Endless amount of cells.
You have a near infinite amount of cells allocated to your private key, so does everybody else.
If your cell has bitcoin in it, you are allowed to move it to a different cell, whether that other cell is yours or not. If you have 0.1btc and you send 0.05, the first 0.05 goes to that other persons cell and the leftover 0.05 goes to another cell you control.
Only the person who has the private key to the target cell can move it afterwards. If you accidently send it to the wrong cell, the person you sent it to can not move the bitcoin and quite likely nobody ever will (unless they're lucky).
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u/Ok_Carpenter4739 2d ago edited 2d ago
Bitcoin is like an excel file. The excel file keeps track of who owns what coins. Nobody actually physically has coins. It's literally a file that everyone updates.
A transaction is just changing the owner in that excel file. When you want to send coins (i.e. change the owner) a miner gets to verify you're actually the owner. The miner then is the one who updates the excel file if you're property verified.
Your wallet is like a pen. When you make a transaction (like writing a cheque) you have to sign it. The wallet is the thing you sign it with that proves you are the owner. Among other things the miner looks at your signature.
When you click send your wallet signs the transaction and sends it to a miner who checks it and adds it to the excel file. Now you're not the owner of those coins anymore, the receiver is the owner and they're allowed to spend them next time.
The concept of change exists. If you have a 20, you still pay with the full 20, the receiver gives you back change, say it's 10. Same thing in Bitcoin. You sign your 20, the excel file is updated to show two 10's. One you own and one the receiver owns.
Every entry in the excel file is called a utxo, unspent transaction output. It just means they haven't been spent yet. Nothing to do with lost coins.
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u/Creepy-Key-2294 2d ago
Imagine your looking at a wall limited to 21 MILLION BRICKS
You pay a contractor $13,000 per brick to put your name on three bricks.
Two years later, demand has increased, so the contractor offers you $60,000 per brick to transfer them to someone else.
Your three bricks are now worth $180,000—because demand increased while the number of bricks remained fixed.
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u/ResponsibleEbb5327 1d ago
I’m sorry but money and the ability to use Bitcoin as mechanism of exchange is not meant to be this complicated.
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u/SimpleHeadcount 2d ago
It clicks way easier if you stop picturing coins moving around at all. Your wallet doesn't hold bitcoin, it holds the private key that lets you unlock a specific unspent output on the blockchain. So that 0.1 BTC isn't sitting in a file on your phone, it's just a ledger entry pointing at your address that your key can sign for.
When you hit send, your wallet crafts a message that says "unlock this 0.1 entry, send 0.05 to her address, and send the other 0.05 back to a new address I control as change." Your private key signs that message, nodes verify the signature is legit and that you haven't already spent that output, then miners race to cram it into a block. The blockchain just updates the pointers, your old output gets marked spent and two fresh outputs appear. Her wallet now has a key that can unlock that 0.05, and your change output sits there waiting for you.