How do transactions work on Bitcoin?

As part of our ongoing series exploring Bitcoin and blockchain, one of the important mechanics of how this technology works is learning how transactions take place.

For a more complete look at transactions, head to Aysha.

The sending checklist

Sending currency across a blockchain network involves a number of steps.

1. Keys 🔑- First you need the public key of the person or company you want to send your money or tokens to. More on keys below.
2. A request ✍️- You tell the network you want to send some of your currency to someone else. You do this via the software the network uses — most use a Wallet
3. Check the records 📚 — The nodes on the network peer through the records on the blockchain to make sure you have the currency to spend, and you haven’t already spent it.
4. Filing 🗄️ — Once the network confirms the transaction can go ahead, it adds it to the existing block. It does that by checking your public and private keys (more on that below).
5. Security 👮 — Once that happens it can’t undone or tampered with, as every other transaction in that block will have to be resubmitted, which would give everyone a bit of a headache.

Public and private keys

Before the above happens you need a set of keys: one public, one private. These are essentially really long numbers, often around 64-digits long. They are tied to each other — and you need both in order to send and receive currency on the network.

Wallets

Your wallet isn’t quite like the wallet you keep in your pocket. It doesn’t hold any currency, it’s a bit of software or an app that holds your keys.

Your wallets also have the ability to initiate the sending and receiving of currency.

You can store a wallet on your desktop, laptop, or even your phone!

While we’ve been talking about the idea of moving money across a blockchain network, it can be used for many things, including.

• ✍️Contracts
• 📝 Records like birth certificates or deeds to property
• 📽️ Music, films, even art!

Want to know more?

This is just the tip of the iceberg! LitePaper is stuffed full of guides like these that help understanding blockchain, cryptocurrencies and distributed ledger technologies simple! Head to LitePaper to discover more.