Bitcoin Transactions
Bitcoin is a digital currency that uses peer-to-peer technology to facilitate secure, fast and low cost payments. Bitcoin transactions are made up of inputs and outputs. Inputs are the source of funds for any given transaction while outputs designate where those funds should be sent. Each input must have a corresponding output in order for a valid transaction to take place on the Bitcoin blockchain network.
When sending or receiving bitcoin, users create an address (also known as public key) which consists of 26–35 alphanumeric characters starting with either 1 or 3. This unique address acts like an email address and can be shared publicly in order for people to send money directly into your wallet without having access to it themselves.
A typical Bitcoin transaction involves several steps:
1) Alice creates her own private/public key pair – this is done using cryptographic software such as BitKey generating two pieces of information: Public Key (the user’s “address”), Private Key;
2) Alice has some Bitcoins stored in her personal wallet associated with her public key;
3) Bob obtains Alice’s public key from somewhere e.g., via instant messaging app;
4) Bob sends his desired amount by creating a message containing both his private & Alice’s public keys;
5) The message is broadcasted onto the network so all participating nodes know about the new proposed transaction; 6 ) Network participants validate the authenticity & accuracy of this data against other existing records before accepting it as part of their ledger ; 7 ) Once approved, miners add it into one block they mine , verifying its validity once again& adding onto chain permanently ; 8 ) Miners then receive reward coins created through process called ‘mining’ . 9 ) Finally , when enough confirmations occur – everyone knows that transfer was successful & balance sheets get updated accordingly .
