A Beginner’s Guide to Reading Blockchain Transaction Histories

Blockchain lets everyone see all the transactions, but not everyone knows how it works. Today, I’d like to show you how to check your own blockchain transactions and how much you have, using a tool called a block explorer.

Don’t Trust, Verify.

Cryptocurrencies such as Bitcoin differentiate themselves from traditional banking by leveraging a technology known as blockchain. Picture blockchain as a comprehensive ledger, documenting each transaction. This ledger isn’t just a record, it’s a transparent history of all cryptocurrency transactions, accessible to anyone.

Usually, to keep track of our money, we might hold onto receipts or carefully check our bank statements. Most of the time we trust in the banks to manage this. However, cryptocurrencies introduce a reliance on trust is replaced with verifiable transparency.

Unlike traditional banking, where transactions are processed behind closed doors, cryptocurrencies operate on a public ledger. This openness means every transaction, from genesis to the latest, is visible.

What advantage does this offer to you?

Beyond the curiosity of looking into each others’ wallets, it provides a utility: the ability to independently verify your transactions. Let’s say, a service displays an incorrect Bitcoin balance, you don’t have to take their word for it. You have the ability to confirm the transaction yourself.

Similarly, if a friend claims to have sent you cryptocurrency but it hasn’t arrived, you can verify their claim by checking the blockchain. “Don’t trust, verify.”

But how can I begin to navigate this ledger? And what’s in a transaction?

You start with a tool called a block explorer. This tool functions much like a search engine, but for blockchain transactions. You can trace who sent what to whom, when and how much they sent, and which tokens were sent.

By entering your cryptocurrency address into a block explorer, it retrieves a history of all transactions associated with it. Thus, the block explorer becomes a powerful instrument for personal accountability in the digital world, allowing you to substantiate your financial history without relying on intermediaries.

What Exactly is a Block Explorer?

A block explorer grants the capability to query the balance of specific addresses or the particulars of any given Transaction ID.

Upon inputting this information, you’re presented with details. For an address, this encompasses each transaction it has participated in, both incoming and outgoing.

When examining a transaction, the explorer reveals the sender, the amount transferred, the recipient, and the transaction fees incurred. Essentially, a block explorer acts as a detailed reference source for all things related to blockchain transactions and addresses, offering a window into their complete history.

Block Explorer Selection

The diversity of block explorers mirrors the variety of cryptocurrencies in existence, as most explorers are dedicated to a particular blockchain network.

Ethereum users often uses Etherscan, known for its widespread use and intuitive interaction with the Ethereum blockchain. Though alternatives like Ethplorer exist, Etherscan remains a favored choice for many due to its enhanced usability.

For those interested in XRP, explorers such as Bithomp and XRP Charts provide detailed insights into transactions on its network.

Here is an example list of blockchain explorers;

How To Read a Cryptocurrency Transaction on a Block Explorer

We’re going to take a closer look at a transaction using a block explorer. If you’re new to the world of cryptocurrencies, figuring out how to inspect a blockchain transaction might initially appear daunting.

However, it’s not just a random numbers and letters. The image below, from the blockchain.com block explorer showing a Bitcoin transaction;

1. The Transaction Hash ID

The transaction hash, or Transaction ID, acts as this transaction’s unique identifier. If you need to find out more about a specific transaction, this is the code you’ll use in a block explorer to pull up its details.

2. The Sender Address and Amount

You can see the address that’s making the transaction and other important details, such as the amount of cryptocurrency being sent. By clicking on the address, you can also explore its history of transactions, both incoming and outgoing.

When you carry out a Bitcoin transaction, the entire balance from your address is sent out, with any remaining amount returned to a separate address known as your change address. Let’s take a deeper look into how this works:

In our example, imagine you have 1 BTC in your address and decide to send 0.1 BTC to a friend.

When you initiate the transaction, your address doesn’t just send the 0.1 BTC; it sends out the full 1 BTC balance. But don’t worry, not all of it goes to your friend. They receive the 0.1 BTC you intended to send, and the remaining 0.9 BTC is directed to another address under your control, known as your change address.

This process is specific to Bitcoin and similar cryptocurrencies; others like Ethereum and XRP don’t operate by sending the entire balance. They only send the amount you specify. It is because Bitcoin is a UTXO (Unspent Transaction Output) based chain, and the others like Ethereum are Account Based blockchains.

You can find out more about Account Based chains and UTXO based chains in this article → https://medium.com/coinmonks/utxo-and-account-based-chains-a1e31cb8610d

3. The Fee

Just like many other cryptocurrency networks, Bitcoin also has transaction fees. In this part, you’ll see how much was paid in fees for the blockchain transaction. These fees go to the validators or miners who help confirm and add transactions to the blockchain.

4. The Receiving Address(es)

In this segment, you’ll find the destination addresses for the transaction on the blockchain. For every receiving address listed, the amount they are set to receive is displayed. Just like with the sending address, you have the option to click on any of the receiving addresses to view their history of transactions.

Typically, the last address listed is the change address we discussed earlier, where the remainder of the funds not sent to the main recipient is returned to you.

5. The Transaction’s Status

A crucial detail that sometimes goes unnoticed is the transaction’s status. Before a transaction is finalized and deemed legitimate, it must be confirmed by the network validators. An unconfirmed transaction, like the one highlighted, is still pending and can potentially be invalidated or canceled. It’s wise to view unconfirmed transactions as “not yet received” and wait for confirmation.

Additionally, it’s not uncommon to observe multiple sending or receiving addresses in a transaction. This occurs through a technique called “Transaction batching.” This method is frequently employed by cryptocurrency exchanges to send funds to several recipients in one go, thereby minimizing transaction fees.