Bitcoin is a decentralized digital currency that allows peer-to-peer transactions without a trusted third party. This blog explains the Bitcoin white paper by Satoshi Nakamoto in simple words.

Online payments usually require banks or payment processors as middlemen. They verify transactions, prevent double-spending, and maintain records. But this requires trust, adds fees, and can introduce delays or reversals.

Satoshi Nakamoto asked: Can we create a system where people can send money directly to each other without trusting a central authority? The main challenge is preventing double-spending in a digital world.

Transactions are messages like 'Alice pays Bob 1 BTC.' Digital signatures ensure only the owner can authorize the transaction. But signatures alone don’t prevent double-spending.

All transactions are recorded in a public ledger (blockchain) so everyone can see the history. A timestamp server groups transactions into blocks, hashes them, and links them together, creating an immutable chain.

To add a block, nodes solve a computational puzzle (proof-of-work). It’s hard to solve but easy to verify. This makes tampering with the blockchain extremely difficult.

Nodes broadcast transactions, collect them into blocks, solve proof-of-work, verify incoming blocks, and accept the longest valid chain. This decentralized process ensures consensus without a central authority.

Miners earn new coins and transaction fees for creating blocks. This incentivizes them to secure the network honestly and discourages attacks.

Transactions are stored in a Merkle tree structure so old transactions can be pruned while maintaining security. Nodes don’t need to store every detail forever.

Lightweight users can verify transactions using only block headers and Merkle proofs, without downloading the full blockchain.

Transactions can have multiple inputs and outputs, allowing payments and change to be handled flexibly.

Users use pseudonymous addresses and new key pairs for each transaction. This provides partial privacy but does not make Bitcoin fully anonymous.

If honest nodes control the majority of computing power, double-spending attacks are improbable. Waiting for multiple confirmations makes transactions safer.

1. Alice creates a transaction paying Bob 2 BTC and signs it with her private key.

2. Nodes receive the transaction and add it to candidate blocks.

3. Miners solve proof-of-work to create a valid block.

4. The block is broadcasted, verified, and added to the blockchain.

5. Bob waits for several confirmations to ensure security.

Transactions + signatures → public ledger → proof-of-work → network consensus → incentives → secure, trustless digital cash.

The Bitcoin white paper is a blueprint for decentralized digital money. By replacing trust with cryptography and incentives, it inspired a whole ecosystem of blockchain-based systems.