A transaction is a transfer of value between Bitcoin wallets of sender and receiver in the blockchain network. Each bitcoin transaction is composed of an amount. The amount is the input (sending address), an output (receiver’s address), and the private keys that allow spending of Bitcoins from an individual’s account. The blockchain is a database which maintains the transaction history since bitcoin’s inception.

Bitcoin transactions work on a decentralized peer-to-peer network using a technology called blockchain. Here’s a simplified explanation of how Bitcoin transactions work:

Wallets: Users store their Bitcoins in digital wallets, which can be software-based (online, desktop, mobile) or hardware-based (physical devices).
Addresses: Each wallet has a unique address, which is a string of characters used to receive Bitcoin. Addresses are derived from cryptographic keys.
Public and Private Keys: Every Bitcoin wallet has a pair of cryptographic keys – a public key (known as the wallet address) and a private key (known only to the owner). The public key is shared openly, while the private key must be kept secure.
Blockchain: Transactions are recorded on a public ledger called the blockchain. It is a chain of blocks, with each block containing a list of transactions. The blockchain is maintained by a network of nodes (computers) that validate and confirm transactions.
Transaction Initiation: When someone wants to send Bitcoins to another user, they create a transaction. This transaction includes the recipient’s Bitcoin address, the amount being sent, and the sender’s private key.
Digital Signature: The sender uses their private key to create a digital signature, which is a mathematical proof that they are the legitimate owner of the Bitcoins being sent.
Verification: The transaction, along with the digital signature, is broadcast to the network. Nodes in the network verify the validity of the transaction using the public key and the digital signature.
Confirmation: Once the majority of nodes agree that the transaction is valid, it is added to a block. Blocks are added to the blockchain through a process called mining, where miners solve complex mathematical problems.
Mining: Miners compete to solve these mathematical problems, and the first one to solve it gets the right to add the next block to the blockchain. This process ensures the security and immutability of the blockchain.
Consensus: The decentralized nature of the network and the consensus mechanism (Proof of Work or Proof of Stake) prevent any single entity from controlling or manipulating the system.
Transaction Completion: Once a transaction is confirmed and added to the blockchain, the recipient’s wallet balance is updated, and the transfer is complete.

Bitcoin transactions are designed to be transparent, secure, and resistant to censorship. The blockchain’s decentralized nature ensures that no central authority has control over the entire network.