How A Bitcoin Transaction Works
Join our community of 10 000 traders on Hacked.com for just $39 per month. This article explains what a Bitcoin transaction is, its purpose and outcome. The explanation made below is suitable for both novice and intermediate Bitcoin users. As a cryptocurrency user you need to be familiar with transaction rudiments – for the sake of your own confidence with this evolving innovation, and as a foundation for understanding emerging multi-signature transactions and contracts, both of which will be explored later in the series. This is not a technical article and explanation will focus on what you need to know about standard bitcoin transactions – the spend transactions we commonly make – and we’ll gloss over what you can safely ignore. An infographic at the bottom of the article provides a comprehensive illustration of the entire Bitcoin transaction process from wallet to blockchain. Note: Even the Core developers acknowledge that some of the language being used to describe transactions and their components can lead one to a mistaken concept of what is really happening. These misconceptions are avoided in the explanation below. So, while trying to keep things as simple as possible, and with the aid of a few diagrams, let’s dive right in. Bitcoin with a capital “B” refers to the protocol – the code, the nodes, the network and their peer-to-peer interaction. bitcoin with a lowercase ‘b’ refers to the currency – the cryptocurrency we send and receive, via the Bitcoin network. tx – wherever it is used in the text – is an abbreviation for ‘ Bitcoin transaction ‘ txid is an abbreviation for ‘transaction id’ – this is a hash that is used by both humans and the protocol to reference transactions. Script is the name of the Bitcoin protocol’s scr Continue reading >>
Bitcoin Block Explorer - Blockchain
Like paper money and gold before it, bitcoin and ether allow parties to exchange value. Unlike their predecessors, they are digital and decentralized. For the first time in history, people can exchange value without intermediaries which translates to greater control of funds and lower fees. Search You may enter a block height, address, block hash, transaction hash, hash160, or ipv4 address... Continue reading >>
Inputs And Outputs - Bitcoin "change" Explained
Last updated on March 18th, 2015 at 10:42 am Did you ever try to send out Bitcoins and found out that a larger amount than what you intended seemed to besent ? Heres an explanation why this happens The blockchain is a big file that keeps track of all Bitcoin transactions ever made. So if you own some Bitcoins, all it means is that the blockchain has references to transactions that were made to your Bitcoin address. The term for these references is Inputs. Now lets say you enter a store to buy a watch for 1 Bitcoin. instead of taking out actual cash from your pocket and paying for something you just tell the seller here are the references that I have this money or here are my inputs. What you mean is here are previous transactions sent to me that add up to 1 Bitcoin or more. This is called an output, so each output is compiled out of 1 or more previous inputs. Once you use an input to pay for something it is considered spent and you cant use it again for other outputs. So in this case once your output is confirmed it will become an input for the seller to use in future transactions. Bitcoin rules state that you cant use just a part of an input. So if for example I wanted to send the seller 1 Bitcoin and the only input or reference I have is from someone who previously sent me 1.5 Bitcoins I will have to use all of this input and return the change back to my original address as a new input. So I will use my 1.5 Bitcoins input, pay 1 Bitcoin to the seller, pay a miners fee and return the rest to my original address. Now for a real live example if you examine the inputs closely you will see that the output consists of an input of 0.142 Bitcoins. 0.005 Bitcoins were sent to someone else, a miners fee of 0.0001 Bitcoins was deducted and the rest of the money was sent back to Continue reading >>
How Do Bitcoin Transactions Work? - Coindesk
Bitcoin transactions are sent from and to electronic bitcoin wallets , and are digitally signed for security. Everyone on the network knows about a transaction, and the history of a transaction can be traced back to the point where the bitcoins were produced. Holding onto bitcoins is great if you’re a speculator waiting for the price to go up, but the whole point of this currency is to spend it, right? So, when spending bitcoins, how do transactions work? There are no bitcoins, only records of bitcoin transactions Here’s the funny thing about bitcoins: they don’t exist anywhere, even on a hard drive. We talk about someone having bitcoins, but when you look at a particular bitcoin address, there are no digital bitcoins held in it, in the same way that you might hold pounds or dollars in a bank account. You cannot point to a physical object, or even a digital file, and say “this is a bitcoin”. Instead, there are only records of transactions between different addresses, with balances that increase and decrease. Every transaction that ever took place is stored in a vast public ledger called the block chain. If you want to work out the balance of any bitcoin address, the information isn’t held at that address; you must reconstruct it by looking at the blockchain. If Alice sends some bitcoins to Bob, that transaction will have three pieces of information: An input. This is a record of which bitcoin address was used to send the bitcoins to Alice in the first place (she received them from her friend, Eve). An amount. This is the amount of bitcoins that Alice is sending to Bob. An output. This is Bob's bitcoin address. To send bitcoins, you need two things: a bitcoin address and a private key. A bitcoin address is generated randomly, and is simply a sequence of lett Continue reading >>
Transaction - Bitcoin Wiki
Byte-map of Transaction with each type of TxIn and TxOut A transaction is a transfer of Bitcoin value that is broadcast to the network and collected into blocks . A transaction typically references previous transaction outputs as new transaction inputs and dedicates all input Bitcoin values to new outputs. Transactions are not encrypted, so it is possible to browse and view every transaction ever collected into a block. Once transactions are buried under enough confirmations they can be considered irreversible . Standard transaction outputs nominate addresses , and the redemption of any future inputs requires a relevant signature. All transactions are visible in the block chain , and can be viewed with a hex editor. A block chain browser is a site where every transaction included within the block chain can be viewed in human-readable terms. This is useful for seeing the technical details of transactions in action and for verifying payments. general format of a Bitcoin transaction (inside a block) if non-zero and sequence numbers are < 0xFFFFFFFF: block height or timestamp when transaction is final Principle example of a Bitcoin transaction with 1 input and 1 output only Input:Previous tx: f5d8ee39a430901c91a5917b9f2dc19d6d1a0e9cea205b009ca73dd04470b9a6Index: 0scriptSig: 304502206e21798a42fae0e854281abd38bacd1aeed3ee3738d9e1446618c4571d1090db022100e2ac980643b0b82c0e88ffdfec6b64e3e6ba35e7ba5fdd7d5d6cc8d25c6b241501Output:Value: 5000000000scriptPubKey: OP_DUP OP_HASH160 404371705fa9bd789a2fcd52d2c580b65d35549dOP_EQUALVERIFY OP_CHECKSIG The input in this transaction imports 50 BTC from output #0 in transaction f5d8... Then the output sends 50 BTC to a Bitcoin address (expressed here in hexadecimal 4043... instead of the normal base58). When the recipient wants to spend this Continue reading >>
How Bitcoin Transactions Work
At its simplest, a bitcoin transaction works by you giving someone else a designated amount of the BTC you own. In order for a bitcoin transaction to be deemed “valid,” there has to be at least one input, although multiple inputs are possible as well. An input is a reference to an output from a previous transaction. Note that every input associated with a bitcoin transaction has to be an unspent output of a previous transaction. Furthermore, every input in a bitcoin transaction must be digitally signed, which occurs through the private key associated with the bitcoin address initiating the transfer of BTC. If multiple inputs are associated with one bitcoin transaction, this means that the amount being sent is coming from multiple bitcoin wallet addresses. Any bitcoin user can generate an almost infinite amount of wallet addresses, each of which can hold any amount of BTC. Here’s an example: If you send 2 BTC to lucky old “Joe” again, 1 BTC comes from wallet address #2, 0.33 BTC comes from wallet address #7, and the remainder comes from wallet address #8. In this example, wallet addresses #1, #3, #4, #5, and #6 have no actual bitcoin balance and can therefore not be used as an input because there is no unspent output associated with these addresses. However, a bitcoin transaction can have not just multiple inputs, but multiple outputs as well. As you might expect, multiple outputs indicate a bitcoin transaction has been sent out to be split over multiple addresses. For example: Your 5 BTC balance will be sent to the now BTC-wealthy Joe (2 BTC) and Marie (1 BTC), and the remaining 2 BTC is sent to a different bitcoin wallet under your control. On the blockchain, this one transaction will have three different outputs, one going to Joe, one to Marie, and the thir Continue reading >>
Why Is My Transaction Not Getting Confirmed And What Can I Do About It?
Why is my transaction not getting confirmed and what can I do about it? without (or with an exceptionally small) transaction fee using extremely small or unconfirmed inputs For whatever reason, I have been waiting forever for my transaction to confirm. Why is it taking so long for my transaction to confirm? What can I do to speed-up the transactions confirmation? This is a canonical question serving as a lightning rod for the flood of "unconfirmed transaction" questions we are experiencing lately. Please provide a detailed and broad answer to serve a wide range of these questions. @Avram: Hey, I generalized your question further to use it as a canonical question to catch a wide range of the "unconfirmed" questions we are getting lately. I hope you dont mind that I recycled it in such a fashion. Murch Dec 21 '15 at 15:53 It would be nice for this question to have answers that address other software besides Bitcoin Core... Nate Eldredge Oct 27 '16 at 17:59 @NateEldredge: Perhaps we should ask questions on how to do this with specific other wallets and then merge them into this one? Murch Oct 27 '16 at 18:15 Bitcoin transactions are mined (processed) by Miners, and Miners want to benefit from their work. By mining transactions with higher fees, they make more money. Some miners can decide to mine all transactions no matter the fee but they still must compete with every other financially motivated miner. Why is it taking so long for my transaction to confirm? without (or with an exceptionally small) transaction fee expect it to be ignored for an unknown amount of time until a miner decides to process it and solves the block; this could be several days to several weeks, possibly never. Your wallet and any Bitcoin node will show it as unconfirmed, your transaction is stuck i Continue reading >>
How Bitcoin Transactions Work
Bitcoin transactions are more complex than you might think. You rarely simply send an amount of bitcoin in one go. Instead, your bitcoin wallet and the bitcoin network have to go through a set of steps to ensure that the right amount of electronic money gets to the recipient. Firstly, it’s important to understand what a bitcoin looks like. It isn’t a single record of a coin, as you might find on an accounting ledger or on your bank statement. Instead, it’s registered as a transaction, comprised of three things: a transaction input, a transaction output, and an amount. The transaction input is the bitcoin address from which the money was sent. The transaction output is the bitcoin address to which the money was sent. If the bitcoin is in your wallet, that will be the bitcoin address under your control. The amount is the amount of bitcoin that was sent. The bitcoins that you send to someone were sent to you from someone else. When they sent them to you, the address that they sent from was registered on the bitcoin blockchain as the transaction input, and your address – the address they sent it to – was registered on the bitcoin network as the transaction output. When you send that bitcoin on to someone else, your wallet creates a transaction output which is the address of the person to whom you’re sending the coin. That transaction will then be registered on the bitcoin network with your bitcoin address as the transaction input. When that person then sends those bitcoins to someone else, their address will, in turn, become the transaction input, and that other person’s bitcoin address will be the transaction output. Using this system, people can trace bitcoin transactions all the way through to when the bitcoin was first created, understanding who sent it t Continue reading >>
Big Transaction Fees Are A Problem For Bitcoin But There Could Be A Solution
Bitcoin transaction fees are proving to be profitable for so-called bitcoin "miners". Miners work out complex cryptographic puzzles to add transactions to the blockchain, a decentralized record of all bitcoin transactions. They are paid in bitcoin in return for their services. On Monday, the total value of all transaction fees paid to miners hit an astronomical sum above $11 million on that one day, according to Blockchain.com data. A debate has been brewing among the bitcoin community surrounding transaction times and fees. Right now it takes an average time of 78 minutes to confirm a bitcoin transaction, according to Blockchain.com. But on Sunday the average time was as high as 1,188 minutes. Slow transaction speeds and fees has led to a number of splits in the original blockchain. In August, the blockchain was forced to split in two a phenomenon known as "hard fork." This led to the creation of a bitcoin spinoff called bitcoin cash. Another fork occurred in October , spawning yet another digital asset called bitcoin gold. These bitcoin offshoots have spawned because some within the bitcoin community believe that the size of blocks records of transactions on the network should be increased. A proposed update known as SegWit2x would have increased the block size from one to two megabytes, but this was dropped last month. Separating bitcoin from its altcoin rivals The boss of blockchain firm Ripple, whose digital currency XRP is the fourth-largest by market value, is skeptical about the use of bitcoin for payments and transfers. "I don't think bitcoin is well-positioned to solve the payments problem," Ripple's CEO Brad Garlinghouse told CNBC earlier this year. Garlinghouse said that his firm's cryptocurrency was "enabling transactions in seconds," adding that the cost Continue reading >>
3 Things To Know About Bitcoin Confirmations
Roughly every ten minutes, a new block is created and added to the blockchain through the mining process. This block verifies and records any new transactions. The transactions are then said to have been confirmed by the Bitcoin network. For example, if Sean sends one bitcoin to John, this transaction will remain unconfirmed until the next block is created. Once that block is created and the new transaction is verified and included in that block, the transaction will have one confirmation. Approximately every ten minutes thereafter, a new block is created and the transaction is reconfirmed by the Bitcoin network. While some services are instant or only require one confirmation, many Bitcoin companies will require more as each confirmation greatly decreases the likelihood of a payment being reversed. It is common for six confirmations to be required which takes about an hour. How many Bitcoin Confirmations are Enough? Payments with 0 confirmations can still be reversed! Wait for at least one. One confirmation is enough for small Bitcoin payments less than $1,000. Enough for payments $1,000 - $10,000. Most exchanges require 3 confirmations for deposits. Enough for large payments between $10,000 - $1,000,000. Six is standard for most transactions to be considered secure. Suggested for large payments greater than $1,000,000. Less is likely fine, but this is to be safe! Once you make a transaction, your wallet should give you an option to view the transaction on a block explorer or give you the transaction ID. A transaction ID looks like this: 7a43510802e113b7059851ef0a8a5c3625db37541861dd982f56253b2d5c4ff9 To check the number of confirmations for a transaction, paste the ID into a block explorer like blockchain.info: Press enter and then youll see more details about your t Continue reading >>
How Do Bitcoin Transactions Actually Work?
How Do Bitcoin Transactions Actually Work? Angel Investors, Startups & Blockchain developers... Whether you’re interested in becoming a developer for blockchain applications, or you’re just looking to understand what happens under the hood when you send bitcoin to a friend, it’s good to have a working knowledge of what happens when you create and broadcast Bitcoin transactions to the Bitcoin network . Why? Because transactions are a basic entity on top of which the bitcoin blockchain is constructed. Transactions are the result of a brilliant collision of cryptography, data structures, and simple non-turing-complete scripting. They’re simple enough that common transaction types aren’t overly-complex, but flexible enough to allow developers to encode fairly customized transactions types as well. Today we’ll take a tour of the former. As a developer, how does your bitcoin client post a new transaction to the network (and what happens when it’s received)? What exactly is happening when you send some bitcoin to a friend? This post will assume that the reader has a basic understanding of hashing, asymmetric cryptography, and P2P networking. It’s also a good idea to have a good sense for what exactly a blockchain is, even if you’re unfamiliar with any specific mechanics. Bitcoin Transactions and their role in the bigger picture Bitcoin is comprised of a few major pieces: nodes and a blockchain. The role of a typical node is to maintain its own blockchain version and update it once it hears of a “better” (longer) version. Simply put, the blockchain has blocks, and blocks have transactions. With this simplified but accurate picture in mind, you might be wondering what exactly a transaction is made out of. How will understanding transactions help me to beco Continue reading >>
Bitcoin Transaction Inputs And Outputs?
Getting your head around the basic structure of Bitcoin and the way it works is best done by following a transaction through the network . The key is to understand that a users balance is the total of Unspent Transactions Outputs or UXTOs registered to their address or addresses. The UXTO database is a list of all unspent transaction for all users and is kept on full nodes. If a user receives some Bitcoin then this transaction is stored in the blockchain i.e. when it was transferred, from whom and how much and is also stored in the UXTO. A wallet aggregates all these unspent transaction belonging to the public keys and addresses, and hidden private keys , and then sums up a balance for the user. A UXTO is indivisible when it is created. That is to say the Bitcoin protocol can only spend the full UXTO in a transaction this is done for multiple reasons but primarily for security and computational efficiency. Put another way each transaction is its own note and can only be fully spent in each transaction. This means that if the price of a particular item is 0.1BTC and you have one 0.2BTC UXTO and one 0.5 BTC UXTO then the transaction to pay will use the 0.5 BTC and spend 0.5BTC of the 0.2BTC generating 0.15BTC in change or you could use the 0.2BTC and generate change of 0.1BTC. Generally most transactions will not be exactly equal to a UXTO you own and as such most transactions will generate change this means the UXTO is continually expanding and is one of the threats to the system in terms of its size. Wallets that allow you to choose which transactions are said to give coin control for most users the function of which transactions are used when is done under the hood. Each Bitcoin transaction creates outputs (apart from OP_RETURN transactions see meta coins for why). Th Continue reading >>
Finding A Bitcoin Transaction Id (txid)
Once you've sent a bitcoin payment from CoinJar to an external bitcoin address, that transfer's details (amount sent, sending/receiving bitcoin address, as well as the date of transfer) can be found on the blockchain. This information is then publicly available, and given its own transaction ID-or TXID. At times, the recipient of your bitcoin transfermay request thistransaction ID from you- typically to confirm you've sent the payment successfully. This transaction ID is safe to share - no personal information is sent from your CoinJar to the blockchain. You may also be looking up the transaction on the blockchain to view its status - how many confirmations it has received. Go to a blockchain explorer site such as blockchain.info , BlockCypher , or Block Explorer in a new browser window. Sites such as these can be used to view all bitcoin payments made on the blockchain. There are many sites that can also search the blockchain, and it's up to personal preference which one you use. In the 'Search' area, you'll need to enter information that is specific to your bitcoin transaction. Typically, this would be the bitcoin address you made the payment to. Once you select 'search', all bitcoin transactions that involve that address will be displayed, newest to oldest. If there are a large number of transactions involving that bitcoin address, the easiest way to navigate toyour particular transaction is to use your browser's Findfeature to search for the exact bitcoin amountyou sent. This is usually under 'Edit > Find', or you can use the keyboard shortcutCommand + F (macOS) or Control +F (Windows). Having found the correct transaction, the transaction ID is displayed as along string of letters and numbers in the grey bar above the amount from the previous step, just to the lef Continue reading >>
Why Are Bitcoin Transaction Fees Sohigh?
Why are Bitcoin transaction fees sohigh? Those who use Bitcoin today are getting scared. You can pay a $10 fee to make a single transfer. This makes it unfeasible to use Bitcoin to pay for purchases of small amounts. But why does this happen? What are these fees? What are they worth for? Why are they so expensive? To understand the high value of transfer fees, it is necessary first to understand some basic concepts of the Bitcoin network. Much is said that Bitcoin is a currency that works in a decentralized network. But what does it mean? First, we must understand the opposite. What is a centralized network? In the early days of the web, there was a music exchange service in mp3 format called Napster . The older ones should remember that. It was a centralized P2P network. This meant that there was a center, in this case, Napster itself, which intermediated all mp3 exchanges among the other participants. If this center were knocked over, the whole net would fall. And thats exactly what happened. After a lawsuit, Napster was closed . Since then, new proposals for sharing files on the Internet have been developed. Bittorrent was one of those that worked. Precisely because it is decentralized. An initial participant creates and distributes a.torrent file that contains information that gives access to a network where other files (movies, music, etc.) can be shared among the other participants of that same network. Each torrent is a network independent of other torrents and without a central point. If the initial participant leaves, the sharing of the files among the other participants continues to work without it. Thats why you can even close some torrent sites like piratebay , but nobody can stop the torrent network. Because these sites only distribute the torrent files. T Continue reading >>
Bitcoin - Wikipedia
Unspent outputs of transactions denominated in any multiple of satoshis  :ch. 5 12.5 bitcoins per block (approximately every ten minutes) until mid 2020,  and then afterwards 6.25 bitcoins per block for 4 years until next halving. This halving continues until 2110–40, when 21 million bitcoins will have been issued. ^ The symbol was encoded in Unicode version 10.0 at position U+20BF ₿ BITCOIN SIGN in the Currency Symbols block in June 2017.  Bitcoin is a worldwide cryptocurrency and digital payment system  :3 called the first decentralized digital currency , as the system works without a central repository or single administrator.  :1  It was invented by an unknown person or group of people under the name Satoshi Nakamoto  and released as open-source software in 2009.  The system is peer-to-peer , and transactions take place between users directly, without an intermediary.  :4 These transactions are verified by network nodes and recorded in a public distributed ledger called a blockchain . Bitcoins are created as a reward for a process known as mining . They can be exchanged for other currencies,  products, and services. As of February 2015, over 100,000 merchants and vendors accepted bitcoin as payment.  Bitcoin can also be held as an investment. According to research produced by Cambridge University in 2017, there are 2.9 to 5.8 million unique users using a cryptocurrency wallet, most of them using bitcoin.  The word bitcoin first occurred and was defined in the white paper  that was published on 31 October 2008.  It is a compound of the words bit and coin .  The white paper frequently uses the shorter coin.  There is no uniform convention for bitcoin capitalization. Some sources use Bitcoin, capitalized, to Continue reading >>