How Do Bitcoin Transactions Work Day 8

in #blog7 years ago

Day 8
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Chapter 2

TRANSACTIONS

How do Bitcoin Transactions

Work?
bitcoin-transaction-life-cycle-high-resolution.png

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.
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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

Next Topic

What does a transaction look like?

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