The way that it works is that a certain number of coins are created when a block is mined. That number is recorded on the ledger associated with an address. L

The way that it works is that a certain number of coins are created when a block is mined. That number is recorded on the ledger associated with an address. Let's say it's 25 BTC, but it can be any number -- it doesn't matter. If you don't spend any of that BTC, then it exists only as that number -- a chunk if you wish. It is indivisible. It sits as 25 BTC in the account. If you decide to spend 5 BTC of the 25, then the ledger records that 5 BTC goes to wherever you are sending it and 20 BTC goes to your wallet. The previous 25 BTC chunk is removed. The 5 BTC exists as a "chunk" in the other wallet and the 20 BTC exists as a "chunk" in your wallet. The 25 BTC "chunk" no longer exists. Each wallet has a list of these "chunks" of BTC. Let's say that I have a 7 BTC "chunk" as well as the 20 BTC chunk. I want to send 22 BTC to someone else. It will take remove both my 20 BTC "chunk" and my 7 BTC "chunk" and give me a 5 BTC "chunk". I can't remember if the recipient gets a 22 BTC "chunk" or a 20 BTC "chunk" and a 5 BTC "chunk" (it's been a long time since I looked at the source code). I think the former, but it is traceable where the original came from and how they "chunks" where split up. Hopefully that makes it a bit more clear. The word "chunk" is my own -- if you start using it in other discussions, nobody will know what you are talking about ;-) However, the main thing is that the wallets do not contain balances, but lists of transactions that ended up giving them coins. While there is no such thing as a "coin", it's discrete amounts rather than flowing in and out like water.