Bitcoin and the blockchain

What a cryptocurrency is, who created Bitcoin, how the blockchain keeps the record of payments, and why nobody can rewrite that record on their own.

When you pay someone from your bank app, the banks are the ones who write down that the money left your account and arrived in theirs. They keep the record, and you trust them to keep it right.

A cryptocurrency is digital money that doesn't need that middleman. In Bitcoin, the first one, the record of who paid whom is copied on thousands of computers around the world, and each of them checks the payments.

Switch between bank and Bitcoin and send a payment from Ana to Bruno.

Bitcoin was described in 2008 in a short paper signed by Satoshi Nakamoto, and the network started running in January 2009.

Nobody knows who Satoshi is. It could be one person or a group. Satoshi looked after the project for about two years, handed the work to other programmers and stopped answering in 2011.

Click the dates to see what happened on each.

Payments are grouped into blocks, and each new block goes at the end of the line. That line of blocks is the blockchain.

Every block has a fingerprint, a code worked out from everything inside it. Change one number and the fingerprint changes with it. Every block also stores the fingerprint of the block before it, and that is what ties them together.

Change an old payment and watch what happens to the blocks after it.

Someone has to put each new block together. In Bitcoin that is a race: specialised machines make trillions of guesses per second, like buying lottery tickets, and the first to hit writes the block. That race is mining.

The winner gets newly created bitcoin, which is how new coins come into circulation. More computing power means more tickets. Today the miners are companies with warehouses full of machines, and a laptop at home almost never wins.

In 2022 Ethereum replaced this with proof of stake: instead of machines, the draw is between people who lock up coins as a guarantee.

Bitcoin's own code sets how many coins will ever exist: 21 million at most. Nobody can create more, not even Satoshi.

The miners' reward started at 50 BTC per block and is cut in half every 210,000 blocks, roughly every four years. That cut is the halving. The latest one, in April 2024, brought the reward down to 3.125 BTC.

The 20 millionth bitcoin was mined in March 2026, and the last one should come out around 2140. Drag the year.

A crypto wallet is an app, or a small device, that holds your keys. The coins are recorded on the blockchain; the key proves they are yours and lets you spend them.

A wallet has an address, which works like an account number: you give it to whoever is paying you. It also has a recovery phrase, 12 or 24 words that rebuild the wallet on any device. Whoever has the phrase has the coins.

There is no "forgot password" and no bank manager to call. Lose your phone with and without the phrase written down and compare.

In a centralized system, everything goes through one company's server. If it goes down, nobody can do anything until it's back, and the company decides who gets to use it.

Bitcoin is decentralized. Each computer on the network talks to a few neighbours and keeps its own copy of the blockchain. There is no headquarters and no off switch, and the network keeps working when some computers drop out.

In both kinds of network, click the computers to switch them off.

Three quick questions, then a challenge.

Someone changed an old payment in a chain of six blocks. Compare the fingerprints and find the block that was tampered with.