Each Bitcoin is a computer file which is stored as a digital wallet in smartphones or computer and functions similar to any e-wallet app. Bitcoins use his currency in a digitalized form which has its limits of production and limited to 21 million Bitcoins only. You can send Bitcoins to your digital wallet and then can send Bitcoins to other people. Every single bitcoin transaction is recorded in a public ledger called the blockchain. The blockchain makes it possible to trace the history of Bitcoins to stop people from spending bitcoins they do not own. It also restricts to make copies or undoing transactions.

Bitcoin operates on a decentralized peer-to-peer network, using blockchain technology. Here’s a simplified overview of how Bitcoin works:

Decentralized Network: Bitcoin operates on a decentralized network of computers (nodes) that are spread across the globe. This network ensures that no single entity has control over the entire system.
Blockchain: Transactions in Bitcoin are grouped into blocks and recorded in a public ledger known as the blockchain. The blockchain is a chain of blocks, each containing a list of transactions. This ledger is maintained by all participating nodes in the network.
Mining: Bitcoin uses a process called mining to validate transactions and add them to the blockchain. Miners compete to solve complex mathematical puzzles, and the first one to solve the puzzle gets the right to add a new block to the blockchain. This process is resource-intensive and requires a significant amount of computational power.
Consensus Mechanism: To maintain the integrity of the blockchain, Bitcoin uses a consensus mechanism called Proof of Work (PoW). This means that for a new block to be added to the blockchain, a miner must demonstrate that a certain amount of computational work has been done, proving the legitimacy of their block.
Cryptographic Security: Bitcoin transactions are secured using cryptographic techniques. Each user has a pair of cryptographic keys: a public key (known as an address) and a private key. The private key is kept secret and is used to sign transactions, providing mathematical proof that they have come from the owner of the address.
Limited Supply: Bitcoin has a capped supply of 21 million coins, making it a deflationary currency. This scarcity is built into the system by the design of the Bitcoin protocol.
Peer-to-Peer Transactions: Users can send and receive bitcoins directly without the need for an intermediary, such as a bank. Transactions are broadcast to the network, verified by nodes through cryptography, and added to the blockchain.
Wallets: To store and manage bitcoins, users use digital wallets. These wallets can be software-based (online, desktop, or mobile applications) or hardware-based (physical devices).

In summary, Bitcoin leverages a decentralized network, blockchain technology, proof of work, and cryptographic security to enable peer-to-peer transactions without the need for a central authority. The system is designed to be secure, transparent, and resistant to censorship.