How do bitcoin transactions work?
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Transactions work by spending outputs from previous transactions as inputs. A transaction contains inputs which reference the specific outputs being spent, and outputs which send funds to new addresses. If the input amount is greater than the output amount, the difference is considered a transaction fee paid to miners. Transactions often include a change output that returns unspent funds back to an address controlled by the sender. Wallets track unspent transaction outputs and can combine multiple UTXOs as inputs to a new transaction if a single UTXO does not cover the full amount being sent. Signatures in the transaction prove the sender owns the inputs and authorize spending them.
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How do bitcoin transactions work?
- 1. How do transactions work? Pavel Kravchenko Lecture 3
- 2. Plan Terms What is transaction What is included there Change and fee Creation of the transaction How can you spend the result
- 3. Terms tx – transaction txid – id of a transaction. Is used to search a transaction in blockchain Script – the name of the script language that describes how a client should validate transactions UTXO - Unspent Transaction Output – transactions output Wallet – key pair Address – public key
- 4. Transaction format Transaction – a signed piece of data that authorizes the sending of funds from one account to another Service information – identifies the transaction and allows implementing it correctly Input – information about where the sender got money from and proof that sender owns this money Output – information about where money is flowing to
- 5. Transaction always spends money from previous transaction
- 6. identifier of transaction amount of inputs and outputs hash of transaction that is spent here signature of the sender and their public key amount of money that is transferred address where money goes Most important fields
- 7. Input Account has no “balance” There is a list of not spent transactions (cheques) Input indicates which previous transaction should be spent Input contains also a signature of the sender
- 8. Transaction that contains 2 inputs and 2 outputs
- 9. Change and fee All the money from previous transaction (you can find this amount if you look up previous transaction) is spent in the current one Difference between money that input has and output spends is considered a fee and is taken by miners If you don’t want to pay high fee :) you have to create output that returns change for you (thats why transactions with many outputs are needed) Change money is sent to address that you control
- 10. How transaction with change is formed
- 11. Combining your unspent transactions If none of the unspent transactions that you have (UTXO) contains enough money to pay - you have to combine a few Here transactions with a few inputs are needed Money are summed up (and fee paid to miners is calculated in the same way - difference between total input and total output) Your wallet (a piece of software) contains key pairs - that is money that you control
- 12. How transactions spend money notice that each transaction pays 10k satoshi as a fee
- 13. Summary Every balance which is received or sent should be tied to the address Every address may be associated with the wallet. All the rest – non-spendable, the coins that are sent to them – are lost The balance that can be spent was always received from the wallet The coins received to the address are not mixed – they are used separately (or in a combination) in the moment when they are spent If the sum of all inputs is more, than the sum of outputs, the change is considered to be a commission