Question 1

What is Bitcoin (BTC)?

Accepted Answer

Bitcoin (BTC) is the native digital asset of the Bitcoin peer-to-peer network. The network records transactions on a public blockchain and is not maintained by a single bank or issuer. Control of a given amount of BTC depends on satisfying the spending conditions prewritten into its unspent transaction output (UTXO), usually by producing a valid signature with the corresponding private key. BTC is therefore not a balance promise in an account database. A wallet balance is the total of UTXOs it can control that have not been spent; a new transaction references old UTXOs as inputs and creates new outputs.

Question 2

How is a BTC transaction verified, and why can it not be double-spent?

Accepted Answer

A BTC transaction is constructed and signed by the payer’s wallet, broadcast to the network, and independently checked by full nodes under the protocol rules. Only a valid transaction can be included in a candidate block by miners. Checks include whether inputs are genuinely unspent UTXOs, whether signature or script conditions are met, and whether total outputs do not exceed total inputs. These checks prevent the same UTXO from being spent again on the accepted chain. If inputs exceed outputs, the difference is not lost: it is the fee the miner who includes the transaction can receive. If outputs exceed inputs, the transaction is invalid. A wallet address or QR code only identifies the recipient’s spending condition; it is not an account password that can replace a private key.

Question 3

How do proof of work, full nodes, and difficulty adjustment operate together?

Accepted Answer

Bitcoin uses proof of work and full-node validation to determine which valid blocks form the main chain. Miners may propose blocks but cannot set the rules unilaterally; every full node verifies blocks and their transactions and rejects blocks that violate the rules. When multiple valid branches coexist, nodes follow the valid chain with the most cumulative work. To find a block, miners repeatedly change variable fields in the block header and hash it until the hash is below the current target. This proves verifiable computational work. A new block header contains the previous block header’s hash, so changing an old transaction requires redoing its block and catching up with all subsequent cumulative work. Difficulty is not fixed. Every 2,016 blocks, the protocol adjusts the target according to the prior period’s block-production time, so that the next period still tends toward an average of about 10 minutes per block despite hash-rate changes. The target tightens when hash rate rises and loosens when it falls.

Question 4

How is BTC issued, and what did the halving change?

Accepted Answer

New BTC issuance comes from the block subsidy in each valid block, not from transaction fees. The protocol halves the subsidy every 210,000 blocks—roughly four years, but triggered by block height rather than a fixed calendar date. This issuance curve makes the supply cap approach 21 million BTC. The fourth halving occurred on April 20, 2024, at block height 840,000, reducing the subsidy per block from 6.25 BTC to 3.125 BTC. It changes the amount of new BTC produced by each subsequent block; it does not proportionally reduce existing holders’ balances or guarantee any particular price movement. A miner’s block revenue has two components: the block subsidy is newly created BTC, while transaction fees are the difference in existing BTC between transaction inputs and outputs. As the subsidy continues to decline under the preset rules, fees may become relatively more important to miner revenue, but actual revenue still depends on block production, fees, and market conditions.

Question 5

What conditions must miners meet to receive block subsidies and fees?

Accepted Answer

Mining is the process of constructing a candidate block and competing to complete proof of work. A miner selects visible valid unconfirmed transactions, creates a coinbase transaction containing the block subsidy and fees from the selected transactions, then repeatedly hashes the candidate block header. The network can accept the block only if its hash is below the current target and the entire block passes rule validation. A successful miner cannot spend the coinbase output immediately. To reduce the risk that the reward’s block becomes stale after a chain fork, a coinbase output must mature through another 100 blocks before it can be spent. If the candidate chain later does not become the valid chain with the most cumulative work, that block’s coinbase transaction does not become an available balance.

Question 6

How are BTC transaction fees formed?

Accepted Answer

BTC network fees are not a fixed percentage of the transfer amount; they are payments a transaction makes to compete for block space. Structurally, a fee equals total inputs minus total outputs and is received by the miner who includes the transaction. Wallets generally estimate the total fee from the fee rate and the transaction’s virtual size. Fee (sat) ≈ fee rate (sat/vB) × transaction virtual size (vB) A sat is a satoshi, and 1 BTC equals 100,000,000 satoshis. SegWit measurement separates transaction data into base and witness portions: transaction weight equals base-data bytes multiplied by 4 plus witness-data bytes; virtual size is weight divided by 4 and rounded up. Thus, the number of inputs and outputs and the output and signature types used affect virtual size, so two transactions each sending 1 BTC can pay different fees. When demand for block space is high, miners generally have more incentive to prioritize transactions with higher fees per unit of size; lower-fee transactions may wait longer. A wallet’s suggested fee rate estimates current competition and is not a protocol-guaranteed fixed price.

Question 7

Why should BTC payments wait for confirmations?

Accepted Answer

When a transaction is first written into a valid block, it is usually said to have one confirmation; each additional valid block built on that block adds one confirmation. Confirmation is not a switch for “absolute irreversibility”: as the cumulative work that must be redone rises, a successful reorganization or double spend becomes harder. Recipients should decide how many confirmations to wait for based on the amount, business risk, and their own rules, rather than mechanically applying one number to every payment. A broadcast transaction not yet in a block is unconfirmed and may be delayed by fee competition, propagation, or conflicting transactions. Even after confirmation, rare chain reorganizations can alter the ordering of recent blocks.

Question 8

What did the Taproot upgrade actually change?

Accepted Answer

Taproot is a deployed set of Bitcoin soft-fork rules, activated on Bitcoin mainnet at block height 709,632. It includes Schnorr signatures (BIP340), Taproot’s SegWit v1 spending rules (BIP341), and Tapscript validation rules (BIP342). Its key change is that a Taproot output may be spent directly through a key path or commit to a set of script paths. If only one condition is actually used, the other unused conditions need not be revealed when spending. Schnorr signatures also support batch verification of certain signatures. Consequently, complex spending using this output type can be expressed more flexibly and, in certain cases, reveal less on-chain information or improve efficiency. Taproot does not make all BTC transactions automatically anonymous or automatically cheaper. Its effects depend on wallets, services, and transactions actually creating and using compatible SegWit v1/Taproot outputs; soft-fork compatibility also does not mean older wallets automatically gain the ability to create or understand every new feature.

Bitcoin (BTC) Price