Bitcoin 101: Transactions – Part 2

In part 2 of the Bitcoin 101 series, I am going to go over a very simple view of what transactions are in Bitcoin.

If I was going to send you 1 bitcoin, that would be 1 transaction. It would consist of me – the sender – sending bitcoin over to you – the receiver.

Here is 1 view of what it would look like:

That picture is rather silly. But it is the starting point to understanding transactions. (txs)

Bitcoin is a currency that has value. The payment of 1 bitcoin to you would be in exchange for a good or service with a related value. Knowing what a bitcoin is worth at any point in time is very important – so be sure to look at a good exchange rate site if you ever need a reference to that.

All transactions are recorded on a public ledger. All txs are public and can be seen by looking at the bitcoin blockchain. My favorite place to look is at www.blockchain.info.

Whoa whoa whoa you say. Going too fast Brock ….

OK let’s step back a minute. Transactions happen because a certain amount of bitcoin is moving between people. A better way to think about it is that bitcoin is moving between two wallets. (If you need to know what that is, see my previous post about wallets.)

The owner of the wallet sends bitcoin to another wallet. So in this case, I would be sending 1 bitcoin from my wallet to your wallet.

All good wallets should have the ability to send and receive bitcoin. Once I put in your wallet address and hit send, there should be a notification to me that bitcoin was sent from my wallet. If you have a good wallet, then it should also notify you that there is a transaction headed your way. That transaction is considered unconfirmed.

Stay with me here… I will try to wrap this up very soon…

The unconfirmed transaction goes from my wallet and it lands on the next closest NODE that is in the bitcoin network. Once the transaction has been added to the next block on the blockchain by miners, it becomes confirmed and you see the bitcoins show up in your wallet. They are now yours!

Editor’s Note:  For more details on each of these, follow any of the links above. (Trying to keep this post short)

Important Points:

1. New blocks are confirmed (on average) every 10 minutes, so you may have to wait that long before the transaction is confirmed.
2. When you get ready to SEND bitcoins to another person/wallet, keep in mind that YOU CANNOT REVERSE BITCOIN TRANSACTIONS!  You just can’t. There are no chargebacks. This is a good and bad thing. It is the same as cash in the fact that if you give a stranger a dollar and he or she walks away, you cannot get that dollar back. Same goes for bitcoin. So just be sure you are meaning to send that money when you are hitting SEND.

Here is what a confirmed transaction looks like:

There are a lot more details, but for now that is a high level overview of what a transaction is and how it moves from one wallet to the next.

Thanks for stopping by and stop back soon for more Bitcoin 101 topics!

Donate any amount to this address to help fund this site:

www.coinbase.com/brockton