Bitcoin Transactions

Very understandably, given the name, when people visualize the Bitcoin network they often picture individual coins moving around a network. However, when you dig into the software you'll find that the concept of individual coins does not exist in the Bitcoin program. What does exist is software that helps the network to manage a shared ledger, the blockchain. It's a ledger that keeps a track of the inputs and outputs of transactions. The unit that the software calculates transactions in is what has become known as a "satoshi" which is 0.00000001 of what we generally think of as a Bitcoin.

This chapter covers transactions and starts by explaining transaction inputs and outputs, and unspent transaction outputs, or UTXOs.

Transactions in Detail

Transactions - Behind the Scenes

Behind the scenes, an actual transaction looks very different from a transaction provided by a typical block explorer. In fact, most of the high-level constructs we see in the various bitcoin application user interfaces do not actually exist in the bitcoin system.

We can use Bitcoin Core's command-line interface (getrawtransaction and decoderawtransaction) to retrieve Alice's "raw" transaction, decode it, and see what it contains. The result looks like this:

Alice's transaction decoded

{
  "version": 1,
  "locktime": 0,
  "vin": [
    {
      "txid": "7957a35fe64f80d234d76d83a2a8f1a0d8149a41d81de548f0a65a8a999f6f18",
      "vout": 0,
      "scriptSig" : "3045022100884d142d86652a3f47ba4746ec719bbfbd040a570b1deccbb6498c75c4ae24cb02204b9f039ff08df09cbe9f6addac960298cad530a863ea8f53982c09db8f6e3813[ALL] 0484ecc0d46f1918b30928fa0e4ed99f16a0fb4fde0735e7ade8416ab9fe423cc5412336376789d172787ec3457eee41c04f4938de5cc17b4a10fa336a8d752adf",
      "sequence": 4294967295
    }
  ],
  "vout": [
    {
      "value": 0.01500000,
      "scriptPubKey": "OP_DUP OP_HASH160 ab68025513c3dbd2f7b92a94e0581f5d50f654e7 OP_EQUALVERIFY OP_CHECKSIG"
    },
    {
      "value": 0.08450000,
      "scriptPubKey": "OP_DUP OP_HASH160 7f9b1a7fb68d60c536c2fd8aeaa53a8f3cc025a8 OP_EQUALVERIFY OP_CHECKSIG",
    }
  ]
}

You may notice a few things about this transaction, mostly the things that are missing! Where is Alice's address? Where is Bob's address? Where is the 0.1 input "sent" by Alice? In bitcoin, there are no coins, no senders, no recipients, no balances, no accounts, and no addresses. All those things are constructed at a higher level for the benefit of the user, to make things easier to understand.

You may also notice a lot of strange and indecipherable fields and hexadecimal strings. Don't worry, we will explain each field shown here in detail in this chapter.