What Happens When You Send Bitcoin?

There is no bank in the middle. Your wallet signs a message saying “move this bitcoin to that address”, sends it to the network, and thousands of independent computers check it and agree to record it. The record is the blockchain.

Your walletsigns itNetworknodes check itMempoolwaits to be pickedA mineradds it to a blockConfirmedmore blocks on topA new block is added about every 10 minutes on average. Higher fees get picked sooner.
From your wallet to a confirmed payment.

Step by Step

  1. Your wallet builds the transaction. It picks bitcoin you received earlier (each earlier payment is a separate piece, called an output), names the recipient’s address and the amount, and sends any leftover back to you as change.
  2. It signs it with your private key. The signature proves the bitcoin is yours without revealing the key.
  3. It broadcasts it. Computers on the network (nodes) check the signature and that the bitcoin hasn’t already been spent, and pass it on.
  4. It waits in the mempool: the pool of transactions waiting to be included.
  5. A miner adds it to a block. Miners choose transactions, usually the ones paying the highest fee per byte first.
  6. Confirmations. Each new block added after yours is one more confirmation. Six is the traditional mark for a large payment being practically final.

Why Do Bitcoin Fees Change?

Blocks have limited space. When many people send at once, they compete for that space, and fees rise. You pay for the size of your transaction in bytes, not for the amount you send: sending a large amount can cost the same as a small one.

Keys and Addresses

  • Address: like an account number you can share.
  • Private key: what proves the bitcoin is yours. Whoever has it can spend it, and there is no bank to reverse a payment.
  • On an exchange, the exchange holds the keys for you, much like a broker holding shares in its own name. Compare who holds your shares.

For Engineers: A Chain of Hashes

Each block contains the hash of the block before it, so changing an old transaction would change every block after it. Inside each block, transactions are summarised by a Merkle tree, which lets a light wallet prove a payment is included without downloading the whole block. Stablecoins and other tokens use the same building blocks: see What Keeps a Stablecoin at $1?

This article explains how the systems work. It is not financial or investment advice, and the rules for crypto assets change and differ from country to country: check the current ones where you live.