How do Bitcoin Transactions Work?

Sending and Receiving Bitcoins

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Bitcoin transactions are digitally signed for security and sent from electronic bitcoin wallet addresses.

The transactions are transparent and their history can be traced back to their origin.

The purpose of these Bitcoin transactions is to transfer Bitcoin ownership from one person to another.

Bitcoins are a digital currency, and they have no physical form. No physical bitcoins exist anywhere; bitcoins are only transaction records of exchanges carried out with different addresses that have balances that either increase or decrease.

All transaction are stored on a ledger known as the Blockchain. All pertinent information like send times, wallet addresses, and amounts are contained within the Blockchain.

How to determine a Bitcoin transaction?

Every bitcoin transaction has three very important aspects:

  1. The input phase, where a record of which bitcoin addresses were used to transfer bitcoins from one person to another.
  2. The amount, quantity of bitcoins being transferred
  3. The output, the receivers Bitcoin address.

Example; If Alicia sends 1 иitcoin to Ronald, then Alicia’s address will form the input phase, the one иitcoin will be the amount, and finally, Ronald’s address will be the output.

Process of Sending a Bitcoin

Before making any Bitcoin transactions, you must have a Bitcoin wallet address and a private key.

Bitcoin addresses are easy to generate in any wallet software. The address consists of numbers and letters. The private wallet key is a secret key which is also comprised of numbers and letters. Without the private key, no transactions can take place.

Therefore, other people can see the amount of bitcoins you have based off of your public key. However, without the private key, no transactions are possible. Thus, private keys make wallets more secure.

What are the transaction fees when trading Bitcoins?

Some miners charge transaction fees while others don’t. For those who do, it’s a small amount that goes to the miner when he successfully solves the final transaction that makes up a block. In the past, the calculation of transaction fees was very complex. However, this is gradually changing, and in the near future, fees will start becoming increasingly smaller.

Why do Bitcoin transactions take time?

A Bitcoin transaction may take time before it’s approved because the transaction must be verified and authenticated by the miners. Usually, bitcoin transactions shouldn’t take more than 10 minutes. However, this time varies depending on how loaded the Blockchain network is.

During transactions is it possible to get receipts?

All information pertaining to transactions carried out with digital currencies is recorded on their respective Blockchains. All bitcoin transactions that have ever taken place can be found on the bitcoin Blockchain. This goes for all cryptocurrencies. For example all Ethereum transactions can be found on the Ethereum blockchain. So, you will not get a personal receipt, though you can see what transactions occurred from your wallet and on the Blockchain. Exchange wallets also hold transaction records. Transaction records may not be deleted or altered on the Blockchain under any circumstances.

Is it possible to broken down Bitcoin into fragments?

Yes. Bitcoins can be split up until the 8th decimal spot. The smallest portion of a bitcoin is called a satoshi. What this means is that 1 whole bitcoin is actually 10^8 satoshis or, 100,000,000 satoshis. Meaning you can buy 1/10th of a bitcoin, 1/4th, or even ½ of a bitcoin.

Terms used in Bitcoin Transactions

Bitcoin with a uppercase “B” refers to the code and their peer to peer interaction or simply the network

Bitcoin with a small “b” refers to the currency that we send and receive

UTXO means  Unspent Transaction Output

Txid means transaction id.

Script – this is a Bitcoin scripting system that approves all bitcoin transactions from the simple ones to the complex ones.


Every bitcoin transaction is independent of one another. Every wallet address is unique, as well as each output. When a bitcoin transaction takes place, two outputs are produced. One output belongs to the receiver of the bitcoins, while the other output is left on your wallet account.

Once a bitcoin transaction is sent, it can never be returned by the sender. Unless the receiver agrees to return the received amount. So, unless you personally know the purpose that you are sending the transaction to, be very carefull. Because if you accidentally send bitcoins to the wrong address, you may never get them back, no matter what you do, who you call, or how much you complain.

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