How Bitcoin (BTC) Works

The technical aspects of how Bitcoin works and how it works in a "real" sense will have to wait until later. For now, we are concentrating on the philosophical aspects of how Bitcoin works.

It is of course good to know that some people use Bitcoin for "speculative purposes". A trader can speculate on the increase and decrease of the price of Bitcoin. That means they buy when the price is low and sell when the price is high. You can read more about Bitcoin trading and techniques at Bitcoin Blog.

The price is really determined by the supply and demand of Bitcoin. The supply is controlled by the miners. When the supply increases, the price decreases.

The Bitcoin software, the BTC software, controls the price of Bitcoin. When you think about it, this is really quite obvious. You are trading on the basis of supply and demand, which means you are trading on the basis of economics.

If you understand how Bitcoin works, you can look at all these things from another perspective. You can understand that there is no government involved in creating or regulating the system. This means there is no central bank.

You don't need a government to print the money. You don't need a government to regulate who can and cannot spend money. You don't need a government to track your transactions. You can just get it from somewhere, and once you have it, you can spend it as you wish.

Many people think that paper ballots are the only way to safeguard your Bitcoins. But is there another way? In fact, there is a way to protect the Bitcoin by "sneaking" it out of sight. The power of cryptography!

Using paper wallets, you can transfer your Bitcoin to another wallet and never be able to trace the transaction. You also have an opportunity to use public key cryptography to mask your activity. You can send your Bitcoins to an address that will show up as unspent when the transaction is made.

There are a lot of ways to do this, but one of the easiest is to just use an exchange. By using a Bitcoin exchange, you can take your Bitcoin and send it to your private wallet.

Then you can use a "key management" tool that will take care of securing the private wallet. When you are done with this, you just give your private wallet to another user so they can send your Bitcoins to you directly from their exchange account.

There is no longer any need to ever see your private wallet again. With the use of encryption, you are able to use your private wallet for transactions in private.

So, how does that fit into the picture of how Bitcoin works? You can use private transactions to move Bitcoins without having to disclose your location. You can use public key cryptography to hide your activity from a third party.