How Bitcoin Works?

Transactions, Blocks, Mining and the Blockchain

Bitcoin becomes trusted and accepted by the bitcoin mechanism of distributed consensus.

Then it is recorded on the blockchain, the distributed ledger of all transactions.

Popular blockchain explorers include:

blockchain.info
blockexplorer.com
biteasy.com

Bitcoin

In the overview diagram below, we see that the bitcoin system consists of users with wallets containing keys.

transactions which are propagated across the network and miners who produce the consensus blockchain, the authoritative ledger of all transactions.

Trace a single transaction as it travels across the network and examine the interactions between each part of the bitcoin system, at a high level.

Subsequent chapters will delve deeper into the technology behind wallets, mining and merchant systems.

customers have the option of paying in either dollars or bitcoin now a days.

Bitcoin Transactions

Transaction tells the network that the owner of a number bitcoins has authorized the transfer of some of those bitcoins to another owner.

The new owner can now spend these bitcoins by creating another transaction that authorizes transfer to another owner, and so on, in a chain of ownership.

Transactions are like lines in a double-entry bookkeeping ledger.

outputs

A transaction output is created in the form of a script, that creates the value and can only be redeemed by the introduction of a solution to the script.