Understand How Bitcoin Works 2026 01 08
Date: 2026-01-08
Presenter: Round Rock Bitcoiners
Outline & Notes
Understand How Bitcoin Works: A Visual Tech Guide
Speaker: Brandon Schreiner (RRBTC) Date: January 08, 2026
1. Core Technology: Hash Functions
Hash functions are the "digital fingerprints" that protect data integrity.
- Fixed Length Output: SHA-256 = 256 bits regardless of input size
- Repeatable: same data produces same hash
- Non-predictable: cannot predict output from input
- One-Way Function: computationally infeasible to reverse (2^256 possibilities)
- Avalanche Effect: single bit change creates entirely different output
2. The Unforgeable Blockchain
- Historical Context: Stuart Haber and Surety LLC started "Linked Timestamping" in 1995, publishing hashes in the New York Times as a "trust anchor"
- Formula: Hash + Public + Linked = Blockchain
- Decentralization: Bitcoin utilizes >20,000 nodes for active decentralized protection
3. Proof-of-Work (PoW)
- Hash all data in a block
- Check if result has enough leading zeros
- If NO: change nonce and repeat
- If YES: broadcast valid block to network
- Target Time: 10 minutes per block (difficulty adjusts every two weeks)
- Supply Cap: strictly limited to 21 million bitcoin
Halving Schedule
| Era | Reward | Total Issued | | 2009-2012 | 50 BTC | 10.5m | | 2012-2016 | 25 BTC | 5.25m | | 2016-2020 | 12.5 BTC | 2.625m | | 2020-2024 | 6.25 BTC | 1.313m | | 2024-Present | 3.125 BTC | 0.656m |
4. Transactions and Ownership
- Private Key: unlocks and signs transactions (keep secret)
- Public Key: locks bitcoin to an address (can be shared)
- UTXO: Bitcoin tracks unspent outputs, not accounts
5. Why Bitcoin? (Value Proposition)
| Property | Bitcoin | Gold | Fiat | | Scarcity | Absolute (21M) | Limited (1-2% growth) | Unlimited | | Portability | High (Digital) | Low (Heavy) | High | | Divisibility | High (8 decimals) | Medium | Medium | | Verifiability | Instant/Easy | Difficult | Medium |
6. Future and Network Effects
- Layer 2 (Lightning Network): small, free, instant transactions
- Soft Forks: Segwit (2017), Taproot (2021)
- Decentralization cannot be repeated; benefits from QWERTY-style network effect
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