Bitcoin transactions are verified through a decentralized process called mining, which relies on blockchain technology and cryptographic principles. Here’s a detailed breakdown of how it works:
1. Transaction Initiation
When you send Bitcoin, your wallet:
Creates a digital signature (using your private key) to prove ownership.
Broadcasts the transaction to the Bitcoin peer-to-peer (P2P) network.
2. Propagation Through the Network
The transaction is sent to nodes (computers running Bitcoin software).
Nodes check:
Validity (correct format, valid signature).
No double-spending (Bitcoin hasn’t been spent before).
If valid, nodes relay it to other nodes.
3. Inclusion in the Mempool (Waiting Area)
Valid transactions enter the mempool (memory pool), a temporary holding area.
Miners select transactions from the mempool to include in the next block.
4. Mining & Proof-of-Work (PoW) Verification
Miners compete to:
Bundle transactions into a candidate block.
Solve a cryptographic puzzle (finding a nonce that produces a valid hash).
First miner to solve it broadcasts the block to the network.
🔹 Why Proof-of-Work?
Ensures security by making attacks costly.
Requires real-world energy expenditure, preventing fraud.
5. Block Validation & Consensus
Other nodes verify the block:
All transactions are legitimate.
The PoW solution is correct.
If accepted, the block is added to the blockchain.
6. Confirmations (Finalizing the Transaction)
Each new block after yours adds a confirmation.
1-3 confirmations are enough for small transactions.
6+ confirmations are standard for high-value transfers (considered irreversible).
Key Security Features
✅ Decentralization – No single entity controls verification.
✅ Immutability – Once confirmed, transactions can’t be altered.
✅ Cryptography – Digital signatures prevent forgery.
✅ Economic Incentives – Miners earn Bitcoin rewards, keeping the network honest.