@ -24,7 +24,7 @@ which is the authoritative ledger of all transactions.
((("blockchain explorer sites")))Each example in this chapter is based
on an actual transaction made on the Bitcoin network, simulating the
interactions between the users (Joe, Alice, Bob, and Gopesh) by sending
interactions between several users by sending
funds from one wallet to another. While tracking a transaction through
the Bitcoin network to the blockchain, we will use a _blockchain
explorer_ site to visualize each step. A blockchain explorer is a web
@ -32,6 +32,7 @@ application that operates as a bitcoin search engine, in that it allows
you to search for addresses, transactions, and blocks and see the
relationships and flows between them.
//FIXME: priv key to P2PKH address
[[bitcoin-overview]]
.Bitcoin overview
image::images/mbc2_0201.png["Bitcoin Overview"]
@ -171,10 +172,10 @@ owner, and so on, in a chain of ownership.
((("transactions", "overview of", id="Tover02")))((("outputs and
inputs", "basics of")))Transactions are like lines in a double-entry
bookkeeping ledger. Each transaction contains one or more "inputs,"
which are like debits against a bitcoin account . On the other side of
the transaction, there are one or more "outputs," which are like credits
added to a bitcoin account. ((("fees", "transaction fees")))The inputs
and outputs (debits and credits) do not necessarily add up to the same
which spend funds . On the other side of
the transaction, there are one or more "outputs," which receive funds.
((("fees", "transaction fees")))The inputs
and outputs do not necessarily add up to the same
amount. Instead, outputs add up to slightly less than inputs and the
difference represents an implied _transaction fee_, which is a small
payment collected by the miner who includes the transaction in the
@ -234,6 +235,8 @@ change.
@enddittaa
////
//FIXME: clarify that these aren't the same transactions as described in
//the text
[[transaction-chain]]
.A chain of transactions, where the output of one transaction is the input of the next transaction
image::images/transaction-chain.png["Transaction chain"]
@ -257,7 +260,7 @@ addresses")))In addition to one or more outputs that pay the receiver of
bitcoins, many transactions will also include an output that pays the
spender of the bitcoins, called a _change_ output.
This is because transaction inputs,
like currency notes, cannot be divided . If you purchase a $5 US dollar
like currency notes, cannot be partly spent . If you purchase a $5 US dollar
item in a store but use a $20 dollar bill to pay for the item, you
expect to receive $15 dollars in change. The same concept applies to
bitcoin transaction inputs. If you purchased an item that costs 5
@ -308,7 +311,7 @@ Another common form of transaction is a _consolidation transaction_ one that spe
into a single output (<<transaction-consolidating>>). This represents
the real-world equivalent of exchanging a pile of coins and currency
notes for a single larger note. Transactions like these are sometimes
generated by wallets and business to clean up lots of smaller amounts.
generated by wallets and businesses to clean up lots of smaller amounts.
[[transaction-consolidating]]
.Transaction aggregating funds
@ -354,62 +357,6 @@ However, because full nodes use more resources, most
user wallets run "lightweight" clients that track only the user's own
UTXOs.
If the wallet application does not maintain a copy of all UTXOs, it can
query the Bitcoin network to retrieve this
information using a variety of APIs available by different providers or
by asking a full node using an application programming interface (API)
call. <<example_2-2>> shows an API request, constructed as an HTTP GET
command to a specific URL. This URL will return all the unspent
transaction outputs for an address, giving any application the
information it needs to construct transaction inputs for spending. We
use the simple command-line HTTP client _cURL_ to retrieve the response.
Note that looking up information using a third-party API like this is similar to
using a block explorer; see the privacy warning in
<<block-explorer-privacy>>.
[[example_2-2]]
.Look up all the unspent outputs for Alice's Bitcoin address
====
[source,bash]
----
$ address=bc1pyfw56zu5vsq0ulu9kytasgw4xwnm3eysll6tfdz8d9gtht97k7tqxsz78n
$ curl https://blockchain.info/unspent?active=$address
----
====
[source,json]
----
{
"notice": "",
"unspent_outputs": [
{
"tx_hash_big_endian": "4ac541802679866935a19d4f40728bb89204d0cac90d85f3a51a19278fe33aeb",
"tx_hash": "eb3ae38f27191aa5f3850dc9cad00492b88b72404f9da135698679268041c54a",
"tx_output_n": 1,
"script": "5120225d4d0b946400fe7f85b117d821d533a7b8e490fff4b4b4476950bbacbeb796",
"value": 100000,
"value_hex": "0186a0",
"confirmations": 111,
"tx_index": 8276421070086947
}
]
}
----
The response in <<example_2-2>> shows one unspent output (one that has
not been redeemed yet) under the ownership of Alice's address.
The response includes the reference to the transaction in which this
UTXO is contained (the payment from Joe), the output index
number, its value in satoshis, and the script derived from Alice's
address. With this information, Alice's wallet
application can construct a transaction to transfer that value to new
owner addresses.
[TIP]
====
View the https://blockstream.info/tx/4ac541802679866935a19d4f40728bb89204d0cac90d85f3a51a19278fe33aeb[transaction from Joe to Alice].
====
In this case, this single
UTXO is sufficient to pay for the podcast. Had this not been the case,
Alice's wallet application might have to combine several
@ -441,8 +388,8 @@ her funds into two outputs: one to Bob and one back to herself. She can
then spend the change output in a subsequent transaction.
Finally, for the transaction to be processed by the network in a timely
fashion, Alice's wallet application will add a small fee. This is not
explicit in the transaction; it is implied by the difference in value between
fashion, Alice's wallet application will add a small fee. The fee is not
explicitly stated in the transaction; it is implied by the difference in value between
inputs and outputs. This _transaction fee_ is collected by the
miner as a fee for validating and including the transaction in a block
to be recorded on the blockchain.
@ -489,10 +436,10 @@ connection: wired, WiFi, mobile, etc. It can also send the transaction
to another program (such as a block explorer) that will relay it to a
node. Her bitcoin wallet does not have
to be connected to Bob's bitcoin wallet directly and she does not have
to use the internet connection offered by the cafe , though both those
to use the internet connection offered by Bob , though both those
options are possible, too. ((("propagation", "flooding
technique")))((("flooding technique")))Any Bitcoin node that receives a
valid transaction it has not seen before will immediately forward it to
valid transaction it has not seen before will forward it to
all other nodes to which it is connected, a propagation technique known
as _gossiping_. Thus, the transaction rapidly propagates out across the
peer-to-peer network, reaching a large percentage of the nodes within a
@ -516,7 +463,8 @@ wallet can further verify Alice's transaction only spends valid UTXOs.
id="MACover02")))((("blockchain (the)", "overview of mining",
id="BToverview02")))Alice's transaction is now propagated on the Bitcoin
network. It does not become part of the _blockchain_ until it is
verified and included in a block by a process called _mining_. See
included in a block by a process called _mining_ and that block has been
validated by full nodes. See
<<mining>> for a detailed explanation.
The Bitcoin system of counterfeit protection is based on computation.
@ -606,26 +554,26 @@ income from the profits.
flowing into the network from user wallets and other applications. As
these are seen by the Bitcoin network nodes, they get added to a
temporary pool of unverified transactions maintained by each node. As
miners construct a new block, they add unverified transactions from this
pool to the new block and then attempt to prove the validity of that new
block, with the mining algorithm (Proof-of-Work). The process of mining
miners construct a new candidate block, they add unverified transactions from this
pool to the ca ndidat e block and then attempt to prove the validity of that
candidate block, with the mining algorithm (Proof-of-Work). The process of mining
is explained in detail in <<mining>>.
Transactions are added to the new block, prioritized by the highest-fe e
Transactions are added to the new block, prioritized by the highest fee rat e
transactions first and a few other criteria. Each miner starts the
process of mining a new block of transactions as soon as he receives the
process of mining a new candidate block of transactions as soon as he receives the
previous block from the network, knowing he has lost that previous round
of competition. He immediately creates a new block, fills it with
of competition. He immediately creates a new candidate block, fills it with
transactions and the fingerprint of the previous block, and starts
calculating the Proof-of-Work for the new block. Each miner includes a
special transaction in his block, one that pays his own Bitcoin address
calculating the Proof-of-Work for the ca ndidat e block. Each miner includes a
special transaction in his candidate block, one that pays his own Bitcoin address
the block reward (currently 12.5 newly created bitcoin) plus the sum of
transaction fees from all the transactions included in the block. If he
finds a solution that makes that block valid , he "wins" this reward
transaction fees from all the transactions included in the candidate block. If he
finds a solution that makes the candidate into a valid block , he "wins" this reward
because his successful block is added to the global blockchain and the
reward transaction he included becomes spendable. ((("mining pools",
"operation of")))Jing, who participates in a mining pool, has set up his
software to create new blocks that assign the reward to a pool address.
software to create ca ndidat e blocks that assign the reward to a pool address.
From there, a share of the reward is distributed to Jing and other
miners in proportion to the amount of work they contributed in the last
round.
@ -638,10 +586,11 @@ mining pool. All the miners participating in that mining pool
immediately start trying to generate a Proof-of-Work for the block template.
Approximately five minutes after the transaction was first transmitted
by Alice's wallet, one of Jing's ASIC miners found a solution for the
block and announced it to the network. After other miners
validated the winning block, they started a new lottery to generate the next
block and announced it to the network. After each other miner
validates the winning block, they start a new lottery to generate the next
block.
//FIXME:Murch CH2 feedback about most-PoW chain
Jing's winning block containing Alice's transaction became part of the
blockchain. The block containing Alice's transaction is counted as one
"confirmation" of that transaction. After the block containing Alice's
@ -719,13 +668,7 @@ committing to it.
Bob can now spend the output from this and other transactions. For
example, Bob can pay a contractor or supplier by transferring value from
Alice's podcast payment to these new owners. Bob's bitcoin
software might consolidate many small payments into a larger payment,
perhaps concentrating all the day's bitcoin revenue into a single
transaction. This would consolidate the various payments into a single
output (and a single address). For a diagram of a consolidation
transaction, see <<transaction-consolidating>>.
Alice's podcast payment to these new owners.
As Bob spends the payments received from Alice and other customers, he
extends the chain of transactions. Let's assume that Bob pays his web
designer Gopesh((("use cases", "offshore contract services"))) in
David A. Harding
10 months ago