How Do Bitcoin Transactions Work Day 8

Day 8

Chapter 2

TRANSACTIONS

How do Bitcoin Transactions

Work?

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.

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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