What actually happens when you send bitcoin?
Sending bitcoin can feel almost too simple. You open your wallet, enter an address and an amount, review the transaction details, and hit send. A few moments later, your wallet tells you the transaction is on its way. But behind that one tap, quite a lot is happening. Your wallet has to build the transaction, prove you’re authorized to spend the bitcoin, send it out to the network, and wait for it to be included in a block.
Here’s what actually happens.
TL;DR
When you send bitcoin, your wallet creates and digitally signs a transaction, then broadcasts it to the Bitcoin network. Nodes check that the transaction follows Bitcoin’s rules. Valid transactions can be relayed across the network and held in nodes’ mempools while they wait to be included in a block. A miner eventually includes the transaction in a candidate block, and nodes verify that block before accepting it. Once your transaction is included in a valid block, it has its first confirmation.
In short:
Create → Sign → Broadcast → Verify → Wait → Mine → Confirm
Step 1: Your wallet creates the transaction
Suppose you want to send some bitcoin to a friend. Your friend gives you a Bitcoin address. You paste or scan it into your wallet and enter the amount you want to send. Your wallet will also account for the transaction fee. Depending on the wallet, you may be able to adjust that fee or simply review the estimated fee before sending. When you hit send, your wallet doesn't actually move coins from one account to another the way a bank might update two account balances. Instead, it constructs a Bitcoin transaction.
Behind the scenes, your wallet identifies bitcoin you can spend and creates instructions for where that value should go next. Usually, the transaction will specify an amount for the recipient and may also send leftover value back to a new address controlled by your wallet. That leftover amount is commonly called change.
So even before the transaction reaches the network, your wallet has already done quite a bit of work.
Step 2: Your wallet signs the transaction
Next, your wallet needs to prove that it is authorized to spend the bitcoin being used in the transaction. It does this using a digital signature created with the appropriate private key.
Your private key itself is not sent across the network. Instead, the signature provides cryptographic proof that the transaction was authorized by someone with the necessary key, without revealing that key.
Step 3: The transaction is broadcast to the network
Now your signed transaction needs to reach the Bitcoin network. Your wallet sends the transaction to one or more Bitcoin nodes. From there, valid transactions can be relayed from node to node across the peer to peer network.
There isn't one central server responsible for receiving and distributing every Bitcoin transaction. The network's participants pass that information between one another.
Step 4: Nodes verify the transaction
Nodes don't simply relay every transaction they receive. Before accepting and relaying a transaction, a node checks it against the rules it enforces.
Among other things, those checks determine whether the transaction is properly constructed, whether the required authorization is valid, and whether the bitcoin being spent is actually available to spend. If the transaction fails the necessary checks, the node rejects it. If it passes, the node may accept it into its mempool and relay it to other nodes.
Step 5: The transaction waits in the mempool
A valid transaction usually isn't added to the blockchain immediately. First, it generally waits in a mempool. A mempool is essentially a node's collection of valid transactions that haven't yet been confirmed in a block.
There isn't one single, universal mempool shared by the entire Bitcoin network. Individual nodes maintain their own, so their contents can differ. This is also where transaction fees become important.
Block space is limited. When there are more transactions competing for that space, miners generally have an incentive to prioritize transactions offering higher fees relative to the amount of block space they consume. That's why sometimes a Bitcoin transaction confirms quickly, while other times it may take longer.
Step 6: A miner includes the transaction in a block
Miners select transactions to include in the candidate blocks they're working to produce. Through Bitcoin's proof of work process, miners compete for the opportunity to produce the next valid block. When a miner succeeds, its candidate block can contain your transaction along with many others. The new block is then shared with the network.
Step 7: Nodes verify the block
Nodes independently check the newly produced block against Bitcoin's rules. If the block and its transactions are valid, nodes can accept it as part of the blockchain and relay it onward. If it breaks the rules they enforce, they reject it.
Step 8: Your transaction gets a confirmation
Once your transaction is included in a valid block, it has its first confirmation. When another valid block is added after that one, your transaction is now two blocks deep. Another block makes it three, and so on.
That's what people mean when they talk about the number of confirmations a Bitcoin transaction has.
Each additional block makes reversing the transaction increasingly difficult because changing it would require replacing the proof of work associated with that part of the chain and catching up with the valid chain as it continues to grow.
How many confirmations someone waits for depends on the situation. A small everyday payment and a very large transaction don't necessarily require the same level of certainty.
What does “pending” or “unconfirmed” mean?
If your wallet says a transaction is unconfirmed, it usually means the transaction has been broadcast but has not yet been included in a block.
That isn't necessarily a problem. Bitcoin does not produce blocks on a fixed schedule. The protocol targets an average interval of roughly ten minutes, but individual blocks can arrive sooner or take considerably longer. Your transaction may also be competing with other transactions for limited block space.
So “unconfirmed” doesn't mean “failed.” It means the transaction hasn't been confirmed in a block yet.
Where does the transaction fee go?
The transaction fee is not paid to Bitcoin itself. When a miner successfully produces a block, it can collect the transaction fees associated with the transactions included in that block, along with the block subsidy permitted by Bitcoin's issuance rules. Fees therefore help create an incentive for miners to include transactions.
One useful detail: Bitcoin transaction fees aren't simply based on how much bitcoin you're sending. They're primarily related to how much block space your transaction consumes and its fee rate.
Can you cancel a Bitcoin transaction?
Not in the same way you might cancel a bank transfer or dispute a credit card payment. Once a valid Bitcoin transaction has been broadcast, there is no central party that can reverse it.
There are techniques that can sometimes replace certain unconfirmed transactions with another transaction paying a higher fee, depending on how the original transaction and wallet were configured. But that's different from having a universal “cancel payment” button.
For the person sending bitcoin, the practical takeaway is straightforward: Check the address, amount, and transaction details before you send.
From “send” to confirmed
What looks like one simple action in your wallet is actually a series of steps happening across the Bitcoin network.
Your wallet constructs and signs the transaction. The transaction is broadcast to the network, where nodes check it and relay valid copies. It waits for available block space, a miner includes it in a candidate block, and nodes verify that block. Once the transaction appears in a valid block, it has its first confirmation. As additional blocks are added afterward, it gains more confirmations.
So the next time your wallet changes from “pending” to “confirmed,” you'll know what was happening in between.
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