A compass is basically a magnet. As you know magnets align with one another when in close proximity. The north of one magnet, is attracted to the south of another and vice versa.
The magnet in a compass has arrows corresponding to the north and south. So it uses the earth’s magnetic field (Formed due to our molten core) and gets aligned to that.
North being north on the compass is because if you treat the earth as giant magnet, the top is north and the bottom is south. So your compass pointing to it, shows north.
The main compasses used in ships are gyrocompasses. They don’t use magnetism but work, effectively, by detecting the rotation of the earth. Since we know that the earth rotates around a line joining the north and south poles, knowing the angle of that line relative to the vertical tells you the direction of the north pole.
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