Day 8
Chapter 2
TRANSACTIONS
How do Bitcoin Transactions
Work?
Bitcoin transactions are sent from and to
electronic bitcoin wallets, and are
digitally signed for security. Everyone on
the network knows about a transaction,
and the history of a transaction can be
traced back to the point where the
bitcoins were produced.
Holding onto bitcoins is great if you’re a
speculator waiting for the price to go up,
but the whole point of this currency is to
spend it.
There are no bitcoins, only records of
bitcoin transactions
Here’s the funny thing about bitcoins:
they don’t exist anywhere, even on a
hard drive. We talk about someone
having bitcoins, but when you look at a
particular bitcoin address, there are no
digital bitcoins held in it, in the same way
that you might hold pounds or dollars in
a bank account. You cannot point to a
physical object, or even a digital file, and
say “this is a bitcoin”.
Instead, there are only records of
transactions between different
addresses, with balances that increase
and decrease. Every transaction that ever
took place is stored in a vast public
ledger called the block chain. If you want
to work out the balance of any bitcoin
address, the information isn’t held at
that address; you must reconstruct it by
looking at the blockchain
Next Topic
What does a transaction look like?
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