Bitcoin

What:

• A decentralised digital currency that allows transferring value over the internet without a central authority.
• It was the first successful implementation of blockchain technology.

Analogy:

Think back to when you were in New York. Everyone bought different things, with different people. At the end, a SplitWise (alternatively, a “ledger”) was tallied to calculate how much everyone owed everyone in the end. What if, everyone put in $500 at the beginning, and we forbade anyone from spending more than they’ve put in.

This same concept can be thought of as “UTXOs (Unspent Transaction Outputs” - essentially there’s always a pot that you can take from (assuming you’re following some protocol). This prevents overspending.

Scaling Bitcoin (Slow…):

• Bitcoin prioritises safety (avoids conflicting histories)
• Thus, blocks are limited in size (to 1MB)
• The number of trailing 0’s (N) is set to ensure that a block gets added to the chain roughly every ~10 minutes.
• Thus Bitcoin is capped at ~7 transactions per minute. (Visa is ~30k/minute)

Sending Bitcoin:

• Not like banks; balance is not debited and credited from accounts.
• Every Bitcoin you own exists as a UTXO. They’re essentially digital treasure chests locked with scriptPubKey; essentially a hash of your public key.
• When you want to “send” Bitcoin, you’re broadcasting an “unlocking script” (scriptSig) for those funds. This proves you’re allowed to send that money.
• Then, you also broadcast a scriptPubKey for the person you’re paying.