How bitcoin works

May 2, 2016 3:54 PM PT

If Craig Wright is who he says he is, the Australian entrepreneur is the creator of bitcoin previously known only by the pseudonym Satoshi Nakamoto -- who is supposedly worth about 1 million bitcoins, or some $450 million.

But how exactly do you use the digital currency? Take a look at how bitcoins work for transactions.

Virtual wallet

Download a “virtual wallet” for mobile or desktop from bitcoin.org. The wallet will contain your bitcoin funds, transactions and security keys.

Get some bitcoins

You buy bitcoins through currency exchanges such as Bitstamp. Bitcoins are stored in your virtual wallets.

Make transactions

To pay someone with bitcoin, have the payee send you a bitcoin address -- a long, unique string of letters and numbers connected to their wallet. Most wallets automatically create a new address for each transaction.

To be paid in bitcoin, send one of your bitcoin addresses to the payer.

Security

All bitcoin transactions are saved and can be viewed publicly through a technology called blockchain, which functions like a ledger. This is a safeguard against fraud and double-spending. The balance and transactions of all bitcoin address are visible to anyone.