How Bitcoin transactions work How Bitcoin transactions work

  Back

How Bitcoin transactions work

updated on:20 Nov 2019

My bitcoin wallet doesn't actually contain my bitcoin. What it does is keep my bitcoin address, which keeps track of all my transactions and therefore my balance. This address, a long string of 34 letters and numbers, is also known as my "public key". I don't care that everyone can see this sequence. Every public address / key has a "private key" corresponding 64 letters and numbers. This is private, and it is crucial that you keep it secret and secure. The two keys are related, but there is no way I can find out my private key from my public key.

That is important, because any transaction you issue from my bitcoin address must be & quot; signed & quot; with my private key. To do that, I put my private key and the details of the transaction (how many bitcoins I want to send and to whom) in the bitcoin software on my computer or smartphone.

With this information, the program spits out a digital signature, which is sent to the network for validation.

This transaction can be validated, that is, it can be confirmed that I am the owner of the bitcoin that I am transferring and that I have not yet sent it to someone else, by connecting the signature and my password. ; blica (which everyone knows) in the bitcoin program. This is one of the cool parts of bitcoin: if the signing was done With the private key that corresponds to that public key, the program will validate the transaction, without knowing what the private key is. Very smart.

Then the network confirms that I have not previously spent bitcoin by checking my address history, which it can do because it knows my address (= my public key) and because all transactions are public on the bitcoin book.

Once my transaction has been validated, it is included in a "block", along with a bunch of other transactions.

Each block includes, as part of its data, a hash of the previous block. That is what makes it part of a chain, hence the term & quot; blockchain & quot ;. So if a small part of the previous block was altered, the hash of the current block would have to change (remember that a small change in the input of the hash the function changes the output). So if you want to change something in the previous block, you also have to change something (= the hash) in the current block, because the one that is; currently included is no longer correct. That is very difficult to do, especially since by the time you are halfway there is probably another block on top of the current one. Then you will also have to change that. And so on.

This is what makes Bitcoin practically tamper-proof.

Share this Blog with your friends

0 Comments

No Comments

Suggested Content

MicroStrategy Board of Directors Now Paid In Bitcoin

updated on:13 Apr 2021

The board of analytics software company MicroStrategy is now paid in Bitcoin, according to the compa

Continue Reading

Bitcoin 'Doesn’t Fulfill Basic Properties of Money': ECB Board Member

updated on:10 Apr 2021

Isabel Schnabel, Member of the Executive Board of the European Central Bank (ECB), has described Bit

Continue Reading

Bitcoin ETF Approval Will Happen: Morgan Creek’s Mark Yusko

updated on:9 Apr 2021

Morgan Creek Capital Management CEO Mark Yusko has expressed his confidence that a Bitcoin ETF will

Continue Reading

Ukrainian Officials Own $2.67 Billion in Bitcoin: Report

updated on:9 Apr 2021

Civil servants and officials in Ukraine are holding a significant amount of Bitcoin (BTC) and other

Continue Reading

JP Morgan's Jaime Dimon: Bitcoin Regulation a ‘Serious Emerging Issue’

updated on:8 Apr 2021

The legal and regulatory status of Bitcoin and other cryptocurrencies is something that needs to be

Continue Reading