A ETF will take a deposit of money, buy bitcoins with it, and give the depositor the equivalent number of newly created shares. Or it will take a deposit of shares, sell the equivalent number of bitcoins, and give the proceeds to the depositor. The bitcoins owned by an ETF are held by a "custodian". CoinBase is the custodian for most ETFs.
Didn't know this. Was all the IBIT shares sold out to initial buyers?
I assume when someone buys IBIT from the market, he or she is buying it not from the Blackrock but from other retail investors?
The "depositor" mentioned above is called an "Authorized Participant". They have a special arrangement with the ETF. The authorized participants constantly trade shares directly with the ETF. They make money off the slight differences between the price of a share and its value.
Everyone else trades shares on a stock market just like any other company.