MASTERING-BITCOIN · Unit 1 · Video 4 · Interactive Practice
| Concept | Value | Description |
|---|---|---|
| 1 BTC | 100,000,000 satoshis | Base unit of Bitcoin |
| 1 mBTC | 0.001 BTC = 100,000 sats | Millibitcoin — common for small amounts |
| 1 satoshi | 0.00000001 BTC | Smallest unit, named after Bitcoin's creator |
| Block confirmation | ~10 minutes | Average time to be included in a block |
Bitcoin is divisible down to 8 decimal places. The smallest unit — a satoshi — equals 0.00000001 BTC. Drag the slider to see how different amounts look across unit systems.
Try setting the slider to 100,000 satoshis — that's exactly what Alice received from Joe (0.001 BTC).
⚙ interactive visualization — coming to this page format soon
💡 Notice: Even 500,000 satoshis is only 0.5% of a single Bitcoin! Alice's 0.001 BTC (100,000 sats) is a tiny fraction — yet it's enough for many real transactions. This extreme divisibility is what makes Bitcoin practical for payments of any size.
The Bitcoin blockchain is public — anyone can look up an address and see every transaction sent to it. If Alice gives the same address to multiple people, each sender can see all the others' payments. Toggle between strategies and change the number of senders to see how privacy leaks multiply.
Switch to "Fresh address" mode — what changes?
⚙ interactive visualization — coming to this page format soon
💡 Key insight: With address reuse, privacy leaks grow as where is the number of senders. With 5 senders sharing one address, that's 10 pairs who can cross-reference each other's payments. A fresh address per payment keeps every transaction isolated. Alice's wallet generates a new address automatically each time she taps "Receive."
When Joe sends Bitcoin to Alice, the transaction passes through 7 stages. User actions and network propagation happen in seconds, but block confirmation takes roughly 10 minutes. Drag the time slider to watch each stage activate.
At what point does the transaction become truly irreversible?
⚙ interactive visualization — coming to this page format soon
💡 Key takeaway: The user actions (Steps 1–4) and network propagation (Steps 5–6) happen within minutes. But the wait for block confirmation (Step 7) takes roughly 10 minutes. Once confirmed, the transaction is permanent — no bank, company, or government can reverse it. That's why you must double-check the address and amount before tapping "Send."
Question 1 · Wallet Types
What is the key advantage of a noncustodial wallet over a custodial wallet?
✅ Correct! With a noncustodial wallet, you hold the keys. No company can freeze, seize, or lose your funds.
❌ Not quite. Think about who controls the private keys and what that means for your access to funds.
Answer: You hold your own keys — no company can freeze your funds.
A noncustodial wallet means you — not a company — hold the private keys. This gives you full control:
The tradeoff: you are solely responsible for your recovery code. There is no "forgot password" option and no customer support. If you lose your seed phrase, your bitcoin is gone permanently.
A custodial wallet (like an exchange wallet) means a company holds your keys — convenient, but they can freeze your account, get hacked, or go bankrupt.
Question 2 · Unit Conversion
Alice receives 0.001 BTC from Joe. How many satoshis is that?
Recall: 1 BTC = 100,000,000 satoshis.
✅ Correct! 0.001 BTC × 100,000,000 sats/BTC = 100,000 satoshis (also known as 1 mBTC).
❌ Not quite. Multiply 0.001 by 100,000,000 — that's the number of satoshis in one full Bitcoin.
Answer: 100,000 satoshis.
This amount is also written as 1 mBTC (one millibitcoin).
Quick reference:
Question 3 · Seed Phrase Security
True or False: If an app asks you to enter your seed phrase while browsing or making a regular transaction (not during initial setup or wallet recovery), you should enter it to verify your identity.
✅ Correct! This is a phishing attack. Your seed phrase should only be entered during initial wallet setup or recovery — never during normal use.
❌ Incorrect — this is dangerous! Entering your seed phrase when prompted by an app during normal use is exactly how wallets get stolen. Close the app immediately.
Answer: False.
Your seed phrase should only be entered in two situations:
Any app that asks for your seed phrase at any other time is almost certainly a phishing attack. Close it immediately.
The golden rules for seed phrases:
Question 4 · Address Reuse and Privacy
Alice gives the same Bitcoin address to 4 different people who each send her a payment. Because the blockchain is public, how many pairs of senders can see each other's transactions to that address?
✅ Correct! With 4 senders, there are 4×3÷2 = 6 pairs who can cross-reference each other's payments. That's why you should use a fresh address for every transaction!
❌ Not quite. Think about how many unique pairs you can form from 4 people. Try the privacy visualization above with 4 senders to see it visually!
Answer: 6 pairs.
With 4 senders (A, B, C, D) all sending to the same address, the possible pairs who can see each other's transactions are:
(A,B), (A,C), (A,D), (B,C), (B,D), (C,D) = 6 pairs
The formula is:
This is why Bitcoin addresses are designed for single use — a fresh address for each payment prevents senders from linking each other's transactions. Alice's wallet generates a new address automatically every time she taps "Receive."
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