How Does a Bitcoin Transaction Work?
A Bitcoin is made up of three parts. A public key, a private key, and an address. All these are are just long strings of characters like in the picture below.
To receive bitcoin you have an address. If you imagine sending an email you’d tell someone your email address, they send the email to you and you receive it on your email app.
While bitcoins also get sent to an address, there are two main differences. The address is a long set of characters that would be next to impossible to remember and the address changes each time you receive bitcoin. You don’t need to think about these changing addresses as your wallet takes care of it for you.
Public key – Your single key that generates bitcoin addresses to use for each transaction.
Bitcoin address – This is what you give out to people to send you money. The address is automatically generated by your public key so you don’t have to do anything to get a new one each time as your wallet does this with each new transaction.
Private key – This is the one you have to keep safe and confidential. If someone gets a hold of this, they can get a hold of all your coins.
Sending and Receiving Bitcoin
After opening up your account with a wallet provider, the best way to understand bitcoin payments is by getting your feet wet right from the get-go and making a transaction. But what does making a transaction entail exactly?
Sending – To send bitcoin you simply copy and paste someone’s bitcoin address into your wallet then send it.
Receiving – To receive it you just give out your address to the sender and you wait awhile (usually less than an hour) until your transaction is verified then you check your wallet.
Read our wallet guides for step-by-step details on how to send and receive bitcoin according to each individual wallet.
Transaction Fees
With Bitcoin, the sender pays the fee for the transaction, which is not the case with traditional credit cards where the recipient takes responsibility for the cost of the transaction.
Transaction fees depend on how many other transactions are waiting for confirmation. Once sent, Bitcoin payments are irreversible, and cashback is only possible with a willing receiver on the other side.
Read our Guide to Bitcoin Transaction Fees to learn more about how these fees work and how to save money on fees.
Page 6 – What is the Blockchain?
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