7.12 How a Bitcoin Transaction Works

Understanding the step-by-step process of a Bitcoin transaction is crucial for grasping the underlying mechanics of Bitcoin. Here’s a breakdown of how it works:

1. Someone requests a transaction:

2. • A user initiates a transaction by specifying the recipient's Bitcoin address and the amount of Bitcoin to be sent.

3. Transaction is broadcasted to P2P computers (nodes):

4. • The transaction is broadcasted to the Bitcoin network, where it is received by multiple peer-to-peer nodes. Each node maintains a copy of the blockchain.

5. Miners verify the transaction:

6. • Nodes verify the transaction's validity by checking if the sender has enough funds and ensuring the transaction adheres to Bitcoin's rules.

   • Once verified by the nodes, the transaction is forwarded to miners.

7. Transactions are combined to form a data block:

8. • Miners group multiple verified transactions into a block. This block will eventually be added to the blockchain.

9. New block added to the existing blockchain:

10. • Miners compete to solve a complex mathematical problem, a process known as proof-of-work. The first miner to solve the problem gets to add their block to the blockchain.

    • The newly added block is then broadcasted to the network, and all nodes update their copies of the blockchain to include the new block.

11. The transaction is complete:

12. • Once the new block is added to the blockchain, the transaction is considered complete and confirmed. The recipient can now access the transferred Bitcoins.