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how bitcoin transaction works
Bitcoin transactions involve sender message initiation, network broadcasting, miner verification and mining, block confirmation, propagation, multiple confirmations, and eventual fund transfer, ensuring security and immutability.
Oct 07, 2024 at 04:00 am
How Bitcoin Transactions Work
Bitcoin is a decentralized digital currency that operates on a network of computers. Transactions are verified by network nodes and recorded on a public blockchain. Here's how a Bitcoin transaction typically works:
1. Initiation:
- The sender initiates a transaction by creating a message containing the recipient's address, the amount of Bitcoin to be sent, and a transaction fee.
2. Broadcasting:
- The transaction message is sent to the Bitcoin network through dedicated nodes called "miners."
3. Verification:
- Miners verify the transaction by checking its validity, ensuring that the sender has sufficient funds and that the transaction meets all network requirements.
4. Mining:
- Each verified transaction is added to a block along with other transactions and the miner's solution to a complex mathematical problem.
5. Block Confirmation (1st Confirmation):
- The found block is broadcast to the network and accepted by other nodes if it meets the consensus rules.
6. Propagation:
- The confirmed block is propagated throughout the network, becoming fully validated once received by a majority of nodes.
7. Additional Confirmations:
- In order to increase transaction security, miners work to add subsequent blocks to the blockchain, creating additional confirmations for the transaction.
8. Transaction Completion:
- When the transaction has received enough confirmations (typically 6 to 10), it is considered irreversible and the funds are transferred from the sender's wallet to the recipient's wallet.
Key Features:
- Decentralized: No central authority controls the Bitcoin network.
- Anonymity: Transactions are recorded on the blockchain, but sender and recipient identities are not known.
- Immutability: Transactions confirmed on the blockchain are permanently and irreversibly recorded.
- Security: Multiple verifications and multiple levels of encryption ensure transaction integrity.
- Transaction Fees: Miners receive transaction fees to process and validate transactions.
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