Almost everyone has heard of Bitcoin, but few are ready to dig into what’s happening “under the hood.” For many, it’s enough to install a wallet, receive and send coins, or sell them. Yet understanding the basics helps you avoid mistakes and unnecessary questions. In this article, we’ll break down how Bitcoin is structured and how it operates.
The Network: Peer-to-Peer Architecture Without a Center
Bitcoin is a peer-to-peer (p2p) payment network where BTC is the unit of account. Peer-to-peer means all participants are equal: every node simultaneously acts as both client and server. Thanks to this design, the network stays operational with any number of available nodes and doesn’t depend on a central server or administrator. That’s what makes the systеm truly decentralized.
Blockchain: A Chain of Blocks as a “Ledger”
The foundation of Bitcoin is the blockchain—an ordered chain of data blocks. On average, a new block is created every ~10 minutes with a size of up to about 1 MB. It contains the list of included transactions and metadata that cryptographically links it to the previous block. This linkage and cryptography protect history from tampering, making records immutable and transactions effectively irreversible.
The Lifecycle of a Transfer, by Example
Imagine Tony: he has 2 BTC in his wallet and wants to send 1 BTC to his friend Cindy. Tony enters the recipient’s address, the amount, and chooses a fee. The wallet then forms a transaction—a data package indicating how much the sender’s balance will decrease and how much the recipient’s balance will increase. After broadcasting, the transaction propagates through the network and enters the queue to be included in a block.
Fees and Transaction “Weight”
Bitcoin fees are calculated based on the data “weight” (bytes), not the amount of BTC sent. The size depends on the number of inputs (where the coins previously came from) and outputs (where they are going). Typical estimates: one input ≈ 148 bytes, one output ≈ 34 bytes, and a base transaction header ≈ 10 bytes. If Tony has two inputs and two outputs (recipient + “change”), the approximate weight is 148×2 + 34×2 + 10 = 374 bytes. Setting, say, 1 sat/byte, he will pay ~374 satoshis in fees.
Why “Change” Appears
In Bitcoin you can’t “bite off” part of a single input: it’s spent in full. So when Tony sends 1 BTC from input(s) totaling 2 BTC, the difference (minus the fee) returns to his address as a separate output—this is the “change.”
Mempool: The Queue for Inclusion in a Block
Until miners confirm it, a transaction sits in the mempool—a set of transactions waiting to be mined. Miners prefer operations with a higher sat/byte ratio to maximize rewards and fit more transactions into a block. That’s why low-fee transfers can wait longer, and the balance tied to “change” is temporarily unavailable until confirmation.
Mining and Security
Miners collect transactions into blocks and solve a computational puzzle to confirm them. They earn rewards: user fees and newly issued BTC (the block subsidy). Every 210,000 blocks the protocol halves this subsidy—a “halving.” As confirmations accumulate, a transaction becomes far harder to reverse via double spend; rewriting history grows exponentially more complex and expensive with each added block.
Speed: Why “~10 Minutes” Is Normal
The average block time is about 10 minutes. Roughly speaking, if a block is ~1 MB and Tony’s transaction is ~374 bytes, around 2,800 similar transactions fit in a block. That implies throughput of several transactions per second, but real-world speed depends on network load, fees, and the technologies used.
RBF and Faster Confirmations
If Tony set the fee too low and his transfer is stuck in the mempool, the rеplace-by-Fee (RBF) option—available in many wallets—can help. It lets him re-broadcast the same transaction with the same inputs but a higher fee to raise its priority for miners. This isn’t considered double spending because nodes treat the new version as an updаte to the old one.
How Many Confirmations to Wait For
Many services treat a payment as final after 6 confirmations (about an hour), but policies vary: some accept 1–2 blocks, while block rewards can only be spent after 100 confirmations. Modern wallets may show funds as soon as a transaction is included in a block and can optionally allow limited use of unconfirmed transactions—this depends on settings and the service’s risk model.
Best Practices for Users
- Watch the fee market. Before sending, check recommended sat/byte levels—this helps your tx get into the next block faster.
- Enable RBF. It lets you bump the fee if your transfer lingers in the mempool.
- Use SegWit addresses. They reduce transaction weight and save on fees.
- Understand “change.” It returns to your address only after the block confirmation.
FAQ
Takeaways
Bitcoin blends a simple idea with robust engineering: a peer-to-peer network, an immutable blockchain, miner incentives, and transparent rules. Knowing the basics—fees, the mempool, confirmations, RBF, and SegWit—helps you navigate real-world scenarios faster and reduce operational risk.
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This material is for educational purposes only and does not constitute investment advice.
