APRIL 5
Transactions
How Bitcoin Moves Value Without Moving a Coin
The Signal
A Bitcoin transaction uses up old spendable pieces of bitcoin and creates new ones for the people receiving them.
The Reading
Imagine paying $30 with a $50 note. You receive $20 change. Bitcoin does something similar, but no digital coin travels between people.
Instead, the Shared Book keeps track of pieces of bitcoin that are ready to spend. A piece you received earlier is called an output. When you use it in a new payment, it becomes the input.
Suppose you have one piece worth 50,000 sats and pay 30,000 sats. Leaving fees aside, the transaction uses the whole 50,000-sat piece. It then makes two new pieces: 30,000 for the other person and 20,000 back to you as change. Nothing was copied, and no extra bitcoin was secretly created.
To be accepted, you approve the transaction with a special digital signature. The network asks: Is the old piece real and unspent? Is the signature correct? Do the new pieces create extra bitcoin?
When the transaction enters a block, the old piece stays visible but is marked spent. It cannot be used again. The two new pieces are now ready to be used later.
That is a Bitcoin transaction: one old spendable piece closes, new pieces open, and the Shared Book remembers every step.
First Principles
Bitcoin does not send a digital coin from one person to another.
A transaction uses up an old spendable piece and creates new ones.
The network checks that the old piece is real, unspent and correctly approved—and that no extra bitcoin was created.
Today’s Challenge
Write this on a piece of paper:
50,000 sats in → 30,000 sats paid + 20,000 sats change
Cross out the 50,000 because it has been used. Circle the two new amounts.
You have just pictured a Bitcoin transaction.
Tomorrow’s Signal
Addresses