Keys, transactions, and blocks

To help you understand how Bitcoin transactions work, we'll need to explain how some of its basic mechanisms work with various cryptographic algorithms. With the classic example of sending money between Alice and Bob, we will illustrate how the Bitcoin network confirms a transaction.

Creating a transaction

Let's start with an example where Alice wants to send 4.0BTC to Bob. Alice has a bitcoin wallet with two addresses along with the corresponding private keys that control the two amounts 1.2BTC and 2.8BTC. To receive the money, Bob will generate a private key with a Bitcoin address:

Creating a transaction

Figure 4.1 - Alice has a wallet with ...

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