So How Do You Read Blockchain Transactions?
One of Bitcoin’s best attributes as a technology is the fact that it is open source and decentralized. Being open sourced, this means that anyone can look at all of the code or contribute to the bitcoin project at any time. With a decentralized network, Bitcoin users can also track each transaction on the open Bitcoin network (or ledger) which is more commonly known as the blockchain.
The way the Bitcoin blockchain works is that all transactions submitted to the network are grouped and combined into a 1MB file called a block. A block is usually created every 10 minutes. If there is more than 1MB worth of data in the transaction holding area, the more recently submitted transactions will wait in line before being put into a block and confirmed by miners. This process is currently at the crux of the scaling debate taking place right now. There are solutions being proposed by two main set of developers working on the open source Bitcoin project. We’ve covered their proposed solutions and what it could mean to the future of Bitcoin back in our earlier post titled, Bitcoin Outlook. We would recommend reading up on this to satisfy your curiosity.
A Decentralized Transaction Network
We’ve mentioned that Bitcoin’s blockchain is a decentralized network. The confirmation process and cryptography from hashes are a couple of examples of how the network runs and protects itself and your transactions.
Contrary to Bitcoin’s open network, let’s compare this to a centralized transaction on a network like Visa, one of the most common debit and credit card systems in the world. When you swipe your card at your favorite store/restaurant, Visa is checking your bank account (debit) or your credit limit (available credit), to see if you have the funds available and the good standing to be approved for this transaction. Visa owns the database, the merchant information and a large proportion of your personal information too. They have the power to approve or decline your transaction.
The constant updating and multiple confirmation of transactions on the Bitcoin network is a great solution for a low trust, or ‘trustless’ environment. In essence, the network is doing the confirming instead of either of the parties involved in the transaction. In our Visa scenario, we have to trust the organisation to authorise and clear our funds, beholding us to them. With Bitcoin, the independent decentralized network enables the trust to be distributed and self-policing, therefore lowers the need for authority to control your funds.
How to find Bitcoin transactions
You can find and track your transaction activity on the Bitcoin network by using what is called a Block Explorer. Commonly used explorers are available on the web. These include Blockchain.info, TradeBlock, BlockExplorer.com and many others. You can also track transactions if you download the Bitcoin Core software yourself and running a network node on one of your computers.
Let’s see what a transaction looks like on the blockchain.
Tracking a Transaction
Using one of the simplest viewers in Block Explorer, we are going to look at a typical bitcoin transaction (you click the link to see what it now looks like on the web):
The long (64 characters) number under the Details heading starting with daf9f… is the Transaction Hash Number. This transaction is summarised as consisting of 1x Input (on the LH-side), and 2x Outputs (on the RH-side) as they are so called.
The shorter string of numbers (26-35 characters), with the amount of 0.27201 BTC is sent from the source wallet (LH-side), to 2x destination wallet addresses on the right.
Notice that when you add the two output amounts on the right there is a total of 0.27150 BTC, compared to the original input amount of 0.27201 BTC. So why is that different and where did the rest of the money go? The remainder is accounted for by the network fee, which will be paid to the miners for verifying and confirming the transaction. Since at the time this was a newly submitted transaction, the red block indicates that it is still Unconfirmed, meaning it was still waiting to be picked up by the network.
In addition to the block explorers we have listed, there are many others out there that will display the same basic data but will vary in complexity in what they show. Blockchain.info will show an intermediate level of information, whilst a service like TradeBlock will show more detail. Our recommendation is to try a few and pick one that suits your level of understanding.
It may seem like there’s a lot of technical language on these block explorer sites, but don’t let that deter you if you are interested but are not a technologist. If you have a specific transaction you wish to look up, you can easily search by wallet address, transaction hash ID or even block number. As you become familiar, these lookups will be as easy as you find doing a web search in todays world.
The trustless network behind Bitcoin means the that all users like you and lots of others benefit from user participation, where we all contribute to maintaining the decentralized nature of how we transact our money to and from one another.