How Bitcoin works

Bitcoin is often presented as a technical black box. Yet its end-to-end operation rests on a handful of simple mechanisms, organised around a single principle: replace trust in a third party (a bank, a state) with mathematical verification performed simultaneously by thousands of machines.

We follow here the full path of a transaction, from clicking "send" to its definitive recording in the chain, passing through cryptographic keys, the mempool×MempoolWaiting area where Bitcoin transactions sit before being included in a block. The fuller the mempool, the higher the fees required.See in the lexicon →, proof of work×Proof of Work (PoW)Bitcoin's consensus mechanism: miners spend energy to find a valid hash, which makes falsifying the history economically prohibitive. This work is what secures the blockchain.See in the lexicon → and difficulty adjustment×Difficulty adjustmentAutomatic recalibration every 2016 blocks (about 2 weeks) to keep one block every 10 minutes on average, whatever the current hashrate.See in the lexicon →.

The journey of a transaction

Suppose you want to send 0.01 BTC to a friend. Here's what happens behind the scenes:

1. Creation. Your wallet×WalletSoftware or device that manages your Bitcoin keys and lets you sign transactions. A wallet does not really « hold » your bitcoins, it holds the keys that prove you own them.See in the lexicon → builds a message: "address A sends 0.01 BTC to address B", with the associated fee.
2. Signing. The wallet signs this message with your private key×Private keySecret number that proves ownership of bitcoins at a given address. Whoever holds the private key holds the bitcoins. Never share it and never store it in plain text.See in the lexicon →. The signature mathematically proves that you hold the bitcoins, without revealing the key itself.
3. Broadcast. The transaction is sent to a few network nodes, which pass it to their neighbours, until it reaches the whole network in seconds.
4. Waiting in the mempool×MempoolWaiting area where Bitcoin transactions sit before being included in a block. The fuller the mempool, the higher the fees required.See in the lexicon →. The transaction sits in each node×NodeComputer that runs the Bitcoin software and takes part in the network by validating blocks and transactions. A « full node » keeps a complete copy of the blockchain.See in the lexicon →'s memory, in a zone called the mempool (memory of pending transactions).
5. Inclusion in a block. A miner×MinerComputer or farm of computers that solves the cryptographic puzzle required to add a new block to the blockchain, in exchange for a bitcoin reward.See in the lexicon → picks your transaction (because the fee paid is worth it) and includes it in the block it proposes to the network.
6. Confirmation. The block is validated, added to the chain, and every node updates its own copy of the ledger×Ledger, Trezor, Coldcard, BitBoxMain hardware wallet brands. Ledger Nano S Plus / X (French, the best-seller), Trezor Model T (Czech, open source), Coldcard Mk4 (Canadian, ultra-secure, Bitcoin-only), BitBox02 (Swiss, open source).See in the lexicon →. Your transaction has its first confirmation.
7. Finality. Six blocks later (about an hour), it is considered irreversible by nearly the whole community.

Each of these steps deserves a closer look. That's what we do in the next sections.

Public keys, private keys, addresses

Bitcoin relies on asymmetric cryptography×Asymmetric cryptographySystem in which a private key and a public key form a pair. The public key encrypts or verifies, the private key decrypts or signs. The foundation of Bitcoin.See in the lexicon →. Each user has two mathematically linked numbers:

• The private key×Private keySecret number that proves ownership of bitcoins at a given address. Whoever holds the private key holds the bitcoins. Never share it and never store it in plain text.See in the lexicon →: a very large random number. It proves ownership of bitcoins and must remain strictly secret. If anyone obtains it, they can empty your wallet×WalletSoftware or device that manages your Bitcoin keys and lets you sign transactions. A wallet does not really « hold » your bitcoins, it holds the keys that prove you own them.See in the lexicon →.
• The public key×Public keyNumber derived mathematically from the private key, used to build a Bitcoin address. Can be shared freely.See in the lexicon →: mathematically derived from the private key. It can be shared without risk. From the public key, a Bitcoin address×Bitcoin addressString of characters that identifies a destination for receiving bitcoins. Four main formats, starting with 1..., 3..., bc1q... or bc1p... (Taproot, the recommended format in 2026).See in the lexicon → is computed, shorter and more practical to exchange×ExchangeService that lets you buy, sell and swap cryptocurrencies against fiat money. Examples : Kraken, Coinbase, Bitstamp, Bitvavo. Most are custodial.See in the lexicon → (e.g. "bc1q..." in Bech32 format).

When you sign a transaction, the wallet uses the private key to produce a digital signature. Anyone can verify×Don't trust, verifyBitcoiner mantra. Trust no one (bank, government, exchange, influencer), verify on your own through your own node.See in the lexicon →, using just the public key, that the signature is genuine. It's a mathematical proof: no trust required.

Hence the very common Bitcoin phrase: not your keys×Not your keys, not your coinsMantra. If you do not hold the private keys to your bitcoins, you do not truly own them. Echoes of FTX, Mt. Gox, Celsius, and others.See in the lexicon →, not your coins×Not your keys, not your coinsMantra. If you do not hold the private keys to your bitcoins, you do not truly own them. Echoes of FTX, Mt. Gox, Celsius, and others.See in the lexicon →. If your private keys sit at a third party (an exchange for instance), technically that third party owns the bitcoins, and they can block your access, freeze the holdings or lose everything in case of a hack.

The mempool: the transaction waiting room

When a transaction is broadcast, it's not instantly included in the chain. It waits in the mempool×MempoolWaiting area where Bitcoin transactions sit before being included in a block. The fuller the mempool, the higher the fees required.See in the lexicon →, a buffer zone managed independently by each network node×NodeComputer that runs the Bitcoin software and takes part in the network by validating blocks and transactions. A « full node » keeps a complete copy of the blockchain.See in the lexicon →.

At any moment the mempool holds a few thousand to a few hundred thousand pending transactions. Miners draw from it when building a new block.

Since a block can only contain about 2,000 to 4,000 transactions (the limit comes from byte size and SegWit×SegWit (Segregated Witness)Upgrade activated in 2017 that separates signature data from the rest of the transaction. Lowered fees and paved the way for Lightning Network.See in the lexicon → usage), a fee market emerges naturally. The more you pay per byte, the higher your transaction's priority. When the network is congested, fees rise; when it's calm, they drop to a few satoshis per byte.

Two consequences follow:

• Bitcoins are not "free" to move. Expect a few cents to a few francs per transaction in 2026, depending on congestion.
• The network self-regulates: if fees become too high, activity shifts to the Lightning Network×Lightning NetworkSecond-layer payment network on top of Bitcoin. Enables near-instant and near-free payments through channels opened between users.See in the lexicon → (layer 2), designed for fast and cheap payments.

Automatic difficulty adjustment

For a block to be produced every ten minutes on average, the cryptographic puzzle's difficulty must constantly adapt to the worldwide computing power available. That's exactly what Bitcoin does, with no human input, every 2,016 blocks (about two weeks).

The mechanism is straightforward:

• If the previous 2,016 blocks were produced faster than target (10 min × 2016 = 14 days), difficulty goes up.
• If they were slower, it goes down.
• Each adjustment is capped at ×4 or ÷4 per cycle, to avoid shocks.

Practical consequence: you can quadruple the global hashrate×HashrateTotal computing power deployed by miners, measured in hashes per second (EH/s, exahashes). The higher the hashrate, the more expensive the network is to attack.See in the lexicon → overnight (by plugging in entire mining×MiningProcess of validating blocks through proof of work. Consumes electricity by design : that is what secures the network.See in the lexicon → farms), the block cadence stays at ten minutes. A perfect thermostat.

This adjustment is also what makes Bitcoin self-sufficient. The network needs no central bank, no steering committee. The full steering is encoded in the protocol and executed simultaneously by every node×NodeComputer that runs the Bitcoin software and takes part in the network by validating blocks and transactions. A « full node » keeps a complete copy of the blockchain.See in the lexicon →.

The chain and immutability

Every block contains the hash×HashFunction that turns data of any size into a fixed-size fingerprint. The same input always yields the same output, but you cannot go back from output to input.See in the lexicon → of the previous block. This small technical detail has a powerful consequence: trying to modify an old block changes its hash, which invalidates all subsequent blocks, which forces them to be recomputed one by one, racing against a worldwide network that keeps moving forward.

In practice: to alter a transaction with 6 confirmations, an attacker would need to redo 6 blocks of work faster than the entire global network produces the next blocks. That would require controlling more than 50% of the global hashrate×HashrateTotal computing power deployed by miners, measured in hashes per second (EH/s, exahashes). The higher the hashrate, the more expensive the network is to attack.See in the lexicon → for an hour, and beyond a few blocks it becomes economically absurd.

This is called immutability: not an absolute technical lockdown, but an attack economics that quickly becomes prohibitive. The older a transaction, the more locked in it is.

Occasionally, two miners find a block almost simultaneously. The chain briefly has two competing versions. The network eventually converges on the longest chain (the one with the most accumulated work), and the other is dropped. Transactions from the losing block simply return to the mempool×MempoolWaiting area where Bitcoin transactions sit before being included in a block. The fuller the mempool, the higher the fees required.See in the lexicon →. This is called a reorganisation. It remains rare and only touches the very latest blocks.