How do bitcoin transactions work?

2018-11-28T15:51:43.000Z Honest Cash

We made a simple video tutorial for beginners about how bitcoin and cryptocurrency transactions work, and how blockchain technology makes it all possible.


Both Alice and Bob use a bitcoin wallet to make transactions. A wallet is a specialised software that calculates the balance of the user by keeping track of all incoming and outgoing payments.

A wallet also calculates the transaction fee that a user needs to pay to the miners of the network to confirm a transaction. That’s why Bob’s balance decreased with 0.05 bitcoin plus a little more to cover the transaction fee.

Once Bob clicks ‘send’ in his wallet, the transaction gets propagated across the network. Within seconds most of the network knows about this transaction and Alice sees a new pending transaction. Soon a miner adds the transaction to the blockchain by mining a new bitcoin block which includes the transaction. Once enough new blocks are added to the ledger after Bob’s transaction has been confirmed in a block, Alice will see in her wallet that the transaction is confirmed. It means that by now it is recorded to the blockchain and it cannot be reversed.

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