The Path of a Single Bitcoin from “Send” to “Revceived”

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In this video I want to tie everything up and explain how a Bitcoin travels from the moment it is sent, up until its recipient receives it. If you haven’t watched the previous tutorials I recommend starting from there as this video may use some unfamiliar terminology.

To begin with, let’s talk about Bitcoin nodes. Nodes are just computers which are connected to the Internet and hold a complete copy of the Blockchain. If you have a Bitcoin wallet on your computer, you’re probably a node yourself.

Now let’s say I want to send you 1 Bitcoin. I log into my Bitcoin wallet, enter your public address as the recipient and hit “send”.

Once I click “send”, my wallet will use my private key and transaction message to create a unique digital signature for this transaction. The wallet will then group this signature along with my transaction message into of a file. This file will be shared with nodes around the network that will verify its validity using only my public key. If something doesn’t add up they will reject it and stop sharing it.

At this point you will see the transaction on your wallet as “unconfirmed”. Even though the transaction is valid, it’s considered unconfirmed or “unordered” since it’s just floating around the network.

Miners will gather this floating transaction file along with other unconfirmed files like it, and will need to order them in some way. This is important in order to prevent double spending as explained in previous videos.

First the miners will group transactions together into what is know as a block. Afterward, they will try to get the new block into the Blockchain. Miners will use their super powerful computers to solve a mathematical problem; the first miner to succeed in this will get his block into the Blockchain and receive a bounty. At this point the transaction will have 1 confirmation.

So blocks are ordered one after the other dictating the exact transaction order – hence the name Blockchain.

Over time other blocks will be built over the block containing our transaction. The more blocks built the more confirmations you will see, and the risk of me succeeding in double spending this Bitcoin will reduce.

Congratulations…you are now Bitcoin certified.

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Ofir Beigel

Owner at 99 Coins ltd.
Blogger and owner of 99Bitcoins. I've been dealing with Bitcoin since the beginning of 2013 and it taught me a lesson in finance that I couldn't get anywhere else on the planet. I'm not a techie, I don't understand "Hashes" and "Protocols", I designed this website with people like myself in mind. My expertise is online marketing and I've dedicated a large portion of 99Bitcoins to Bitcoin marketing.

2 Comments

  1. Hi Ofir,

    The free BTC that you gave me as part of the sign up has 75 confirmations?

    1. Why does a transaction need to be confirmed so many times?
    2. What does the current miner do, that the previous miner did not do in their process?
    3. What determines a transaction “confirmed”?

    Previous Videos
    4:
    What is the rationale behind
    1. Saying the total BTC available for mint is only 21 million? Why not more ?Why not less?
    2. Satoshi not allowing to mint new BTC?
    3. Satoshi’s rationale to maintain the minted BTC to 0 regardless of how many ever that is processed?

    3/2/1:
    When we say one BTC today is $412,
    1. What determines the current market value of the BTC?
    2. What drives them to fluctuate?

    Appreciate all the effort from you and your team!!

    Thanks
    Ramani

    • Ofir Beigel on

      Hey Ramani, each time another block is mined it’s considered as a new confirmation. So 75 confirmations means that 75 blocks have been mined since the transaction came into the blockchain.

      The 21 million is just an arbitrary number, there’s no explanation behind it. The market value of BTC is determined by supply and demand, meaning how much people are willing to pay for it. At the moment for example people are willing to pay $450 for one Bitcoin. If the supply drops people will probably be willing to pay more.

      I hope this helped out a bit.

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