Bitcoin allow us to send money from one person to another without involving third party like a bank. A software developer Satoshi Nakamoto launch the concept of Bitcoin which is a founder of Bitcoin. It is legal but it depends on who you are, what you are doing with, where you are located. It was legalized as a formal method of payment in Japan and India might be next. Bitcoin is open for all so anyone can get benefit of it.
Cryptography techniques encryption and decryption is used by both the sender and reciever for security. Lets try to understand with example:
1. If Santa transfer bitcoin to Banta than Santa first informs Banta about transferring Bitcoins.
2. Banta creates a block using cryptography key pair in which private key (secret key) is retained by Banta and public key that everyone knows.
3. Santa tells bitcoin client, software that meditates the transaction, that he had like to send 8 Bitcoins to Banta's block.
4. Client transfer the 8 bitcoins to the new block.
5. The block is accessed by private key only, which now rests with Banta and public key , which other miners(decryption of encrypted transaction) used to verify the transaction.