How do Bitcoin Transactions Work? If I want to send some of my bitcoin to you, I publish my intention and the nodes scan the entire bitcoin network to validate that I 1 have the bitcoin that I want to send, and 2 haven’t already sent it to someone else. Once that information is confirmed, my transaction gets included in a “block” which gets attached to the previous block – hence the term “blockchain.
Getting a bit more complicated: My bitcoin wallet doesn’t actually hold my bitcoin.
How much money do you need to invest in BCN?
What it does is hold my bitcoin address, which keeps a record of all of my transactions, and therefore of my balance. This address — a long string of 34 letters and numbers — is also known as my “public key. This is private, and it’s crucial that I keep it secret and safe. The two keys are related, but there’s no way that you can figure out my private key from my public key.
That’s important, because any transaction I issue from my bitcoin address needs to be “signed” with my private key.
So who is behind BCN?
To do that, I put both my private key and the transaction details how many bitcoins I want to send, and to whom into the bitcoin software on my computer or smartphone. With this information, the program spits out a digital signature, which gets sent out to the network for validation. This transaction can be validated — that is, it can be confirmed that I own the bitcoin that I am transferring to you, and that I haven’t already sent it to someone else — by plugging the signature and my public key which everyone knows into the bitcoin program.
This is one of the genius parts of bitcoin: Once my transaction has been validated, it gets included into a “block,” along with a bunch of other transactions. A brief detour to discuss what a “hash” is, because it’s important for the next paragraph: It’s not random — every time you put in that particular data set through the hash function, you’ll get the same character string.
But if you change so much as a comma, you’ll get a completely different character string. This whole article could be reduced to a hash, and unless I change, remove or add anything to the text, the same hash can be produced again and again. This is a very effective way to tell if something has been changed, and is how the blockchain can confirm that a transaction has not been tampered with.
Back to our blocks: That’s what makes it part of a chain, hence the term “blockchain. That’s very hard to do, especially since by the time you’ve reached half way, there’s probably another block on top of the current one. You’d then also have to change that one. This is what makes Bitcoin virtually tamper-proof.