A Deeper Look into Transactions

In the realm of blockchain and Bitcoin, transactions are the lifeblood that enables the movement of digital currency between participants, so it's time to explore the intricacies of blockchain transactions.

Transaction Structure

Once again, a Bitcoin transaction is a digital message that specifies how bitcoins are "moved" (they aren't actually, their ownership changes) from one address to another. At its core, a transaction contains the following components:

Let's now take a look at a real transaction (you can find it here):

As you can see, this transaction contains 7 inputs and 4 outputs, each having a unique address. However, the sums of input bitcoins and output bitcoins do not match with the input sum being greater. Remember, there are also a transaction fees which should be taken into account:

The amount is equal to the sum of output bitcoins, and amount + fees is equal to the sum of input bitcoins.

Transaction Verification

Before a transaction is added to a block and recorded on the blockchain, it must be verified by the network. This verification process ensures that the transaction is valid and conforms to the network's rules. Here are the key aspects of transaction verification:

As we have mentioned in the previous chapter, once verified, the transaction waits in the mempool until a miner selects it to be included in the next block. The block is then broadcast to the network and verified. If everything checks out, the block is added to the blockchain, and the transactions within are considered confirmed.

Additional Confirmation

Let's get back to our transaction. If you opened the link to this transaction, you may have noticed the following:

Once again, the first confirmation occurs when a transaction is included in a block. However, each subsequent block added to the blockchain that builds upon the block containing the transaction counts as an additional confirmation. More confirmations reduce the risk of a transaction being reversed.

As is with our transaction, it's common practice to wait for six confirmations before considering a Bitcoin transaction final since this depth of blocks makes it extremely unlikely for the transaction to be reversed without an enormous amount of computational power.