Bitcoin (BTC)

Overview

Bitcoin transfers values using spendable outputs

Bitcoin is a decentralized digital currency whose network records transfers of bitcoin units, known as BTC. Rather than maintaining one simple account balance inside a smart contract, Bitcoin commonly represents spendable value as unspent transaction outputs, or UTXOs. A wallet chooses available outputs as inputs to a new transaction, sends the desired amount to a recipient and often creates a change output for the sender. This design helps explain why two payments of the same value can have different transaction sizes and fees.

How the underlying system works

Bitcoin uses an unspent transaction output model, commonly called UTXO. A wallet assembles transaction inputs and outputs, signs authorization data and broadcasts the transaction to peers. Miners may include it in a block according to fees and other constraints. Confirmations increase confidence that it remains in the accepted chain, but mempool visibility alone is not final proof of payment.

Merchants taking BTC payments must address exchange-rate risk, network fees, timing and the selected confirmation policy. Invoice software should retain the requested value and actual number of satoshis received. Payment channels such as Lightning have different operational and liquidity mechanics and should not be conflated with on-chain BTC settlement.

A concrete payment from wallet to merchant

A buyer owes 0.002 BTC. Their wallet may select one or more UTXOs totaling more than that amount, create an output of 0.002 BTC to the merchant, return change to another wallet-controlled address and pay a mining fee equal to the difference between input and output totals. Miners may include the signed transaction in a block. The merchant monitors the relevant output and decides how many confirmations its policy requires. Seeing the transaction in the mempool is a different stage from its inclusion in a block. The wallet's displayed balance does not by itself prove the intended invoice was satisfied.

Merchant considerations beyond BTC price

Bitcoin's price can move while an order waits for payment, so a merchant needs a rule for invoice currency, exchange rates and expiration. Network fees and confirmation times vary with demand. Refunds require a new transfer or other authorized arrangement; there is no native card-style chargeback workflow. A merchant can hold BTC, convert it, or use a provider with a different settlement model. Each option changes accounting, treasury and operational risk. Bitcoin's shared ledger provides transparent transaction evidence, but order references and fulfillment decisions remain outside the blockchain.

Further reading and related concepts

Reference documents: Bitcoin Developer — Transactions, Bitcoin Developer — Block Chain.

Related glossary topics: Transaction Hash, Confirmation, Network Fee.