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Definition: Bitcoin transaction


A transfer of bitcoins from one party to another. The Bitcoin transaction is generated in a digital wallet and transmitted to the Bitcoin network where it is verified in a Bitcoin "node" and added to the blockchain-based ledger by a Bitcoin "miner." See Bitcoin wallet and Bitcoin mining.

UXTOs and Inputs
Because a person's bitcoins can span numerous blocks in the blockchain, the Bitcoin wallet scans the blockchain looking for every "unspent transaction output" (UXTO) that contributes to the user's bitcoin balance. Either the wallet itself or a third-party service maintains a database of UXTOs for the bitcoin holder. Each UXTO is indivisible and cannot be divided. Therefore, if the UXTO is larger than the amount to be paid, change is made in the form of a new UXTO back to the user, the same as buying something for $6 with a $10 bill and receiving $4 in change.

To make a payment, the wallet creates one transaction input that points to a UXTO and unlocks it with a digital signature (private key) that proves ownership. The transaction is then broadcast to the Bitcoin network. See digital signature, Bitcoin node, Bitcoin and blockchain.