When you tap "Send" in your Bitcoin wallet, a chain of events unfolds across a global network of computers. Understanding this process helps you make smarter decisions about fees, timing, and which layer to use for your transactions.
Here is the step-by-step journey of a Bitcoin transaction:
Your wallet software constructs a transaction message. This message says: "I want to send X amount of BTC from my address to this destination address." It includes a digital signature proving you own the Bitcoin you are spending, the source funds (UTXOs), the destination address, and the fee you are willing to pay miners.
Your wallet sends this signed transaction to Bitcoin nodes it is connected to. Those nodes verify the signature is valid and the funds exist, then relay the transaction to other nodes. Within seconds, your transaction has spread to thousands of nodes worldwide.
Your transaction lands in the "mempool" (memory pool) — a waiting area where unconfirmed transactions sit until a miner picks them up. Your transaction competes with others based on the fee rate you attached.
A miner selects your transaction from the mempool (higher-fee transactions get priority), includes it in a new block, and solves the proof-of-work puzzle. Once the block is added to the blockchain, your transaction has its first confirmation.
Each subsequent block mined on top of your block adds another confirmation. After 1 confirmation, your transaction is included in the blockchain. After 6 confirmations (about 60 minutes), it is considered virtually irreversible.
UTXO stands for "Unspent Transaction Output," and it is the fundamental unit of Bitcoin ownership. Unlike a bank account that tracks a running balance, Bitcoin tracks ownership through individual chunks of value called UTXOs.
Think of it like cash in your physical wallet:
| Concept | Cash Analogy | Bitcoin UTXO |
|---|---|---|
| Ownership | Bills in your wallet | UTXOs locked to your address |
| Spending | Handing over bills | Referencing UTXOs as inputs |
| Change | Getting bills back | A new UTXO sent to your change address |
| Denominations | $1, $5, $20, $100 | Any amount (0.00000001 BTC to millions) |
| Verification | Checking for counterfeits | Verifying digital signatures and chain history |
If your wallet contains many small UTXOs (from lots of small transactions), spending them all at once costs more in fees because the transaction is physically larger. This is why consolidating UTXOs during low-fee periods is a smart practice. Some wallets do this automatically; others require manual management.
The mempool is where all unconfirmed Bitcoin transactions wait to be picked up by miners. Understanding the mempool helps you predict how long your transaction will take and how much you should pay in fees.
| Mempool State | Pending Transactions | Typical Fee (sat/vB) | Expected Wait |
|---|---|---|---|
| Empty | <5,000 | 1-2 sat/vB | Next block (~10 min) |
| Normal | 5,000-20,000 | 5-15 sat/vB | 1-3 blocks (10-30 min) |
| Busy | 20,000-50,000 | 20-50 sat/vB | 3-6 blocks (30-60 min) |
| Congested | 50,000-100,000 | 50-200 sat/vB | 6-20 blocks (1-3 hours) |
| Extreme | >100,000 | 200+ sat/vB | Unpredictable (hours to days) |
Pro tip: Check a mempool explorer like mempool.space before sending transactions. If the mempool is congested and your transaction is not urgent, wait for it to clear and save on fees.
A "confirmation" in Bitcoin means your transaction has been included in a block that has been added to the blockchain. Each new block mined on top of that block adds another confirmation. More confirmations means your transaction is harder to reverse.
| Confirmations | Time (Average) | Security Level | Typical Use Case |
|---|---|---|---|
| 0 (unconfirmed) | 0 min | Lowest — can be double-spent | Small purchases, trusted parties |
| 1 | ~10 min | Good for most small transactions | Online purchases, casino deposits |
| 2-3 | 20-30 min | Strong — reversal very unlikely | Medium-value transactions |
| 6 | ~60 min | Industry standard for "final" | Large purchases, exchanges |
| 12+ | ~2 hours | Extremely secure | Very large transactions |
Bitcoin's protocol adjusts the mining difficulty every 2,016 blocks (roughly two weeks) to maintain an average block time of approximately 10 minutes. This is a design choice by Satoshi Nakamoto that balances transaction throughput, security, and network propagation time. Some blocks arrive in 1 minute, others take 30+, but the average tends toward 10.
Bitcoin transaction fees are not based on the amount you send. You can send $1 million or $1 and pay the same fee. Instead, fees are based on the data size of your transaction measured in virtual bytes (vB).
| Address Type | Starts With | Typical Size (1-in, 2-out) | Fee at 10 sat/vB |
|---|---|---|---|
| Legacy (P2PKH) | 1... | ~226 vB | 2,260 sats |
| SegWit (P2SH) | 3... | ~167 vB | 1,670 sats |
| Native SegWit (bech32) | bc1q... | ~141 vB | 1,410 sats |
| Taproot (P2TR) | bc1p... | ~111 vB | 1,110 sats |
Key insight: Using a Taproot (bc1p...) address saves roughly 50% on fees compared to Legacy addresses. If your wallet supports it, always use Taproot or Native SegWit for the lowest fees. SPUNK.BET uses Taproot addresses for all Bitcoin operations.
Use Taproot addresses whenever possible. Batch transactions if you are sending to multiple destinations. Send during low-fee periods (check mempool.space). Use Replace-By-Fee (RBF) to start with a low fee and bump it only if needed. For small, frequent transactions, consider Lightning Network instead.
The Lightning Network is a "Layer 2" protocol built on top of Bitcoin's base layer. It enables instant, near-free Bitcoin transactions by creating payment channels between users that settle to the main blockchain only when the channel is opened or closed.
Two parties create a payment channel by locking Bitcoin in a multi-signature address on the main blockchain. This is the only on-chain transaction required.
Once the channel is open, the two parties can send Bitcoin back and forth instantly with zero on-chain fees. Each transaction updates the balance sheet of the channel but does not touch the blockchain.
You do not need a direct channel with everyone you want to pay. Lightning routes payments through a network of connected channels. If you have a channel with Alice and Alice has a channel with Bob, you can pay Bob through Alice.
When either party wants to settle, they close the channel with a final on-chain transaction that reflects the current balance. All intermediate payments are compressed into this single settlement.
| Feature | On-Chain (Layer 1) | Lightning (Layer 2) |
|---|---|---|
| Speed | 10-60 min (1-6 confirmations) | Under 1 second |
| Fee | $0.50-$50+ (varies with congestion) | Fractions of a cent |
| Min Amount | ~546 sats (dust limit) | 1 sat |
| Max Amount | No practical limit | Limited by channel capacity |
| Privacy | Public on blockchain | Only sender and receiver know |
| Best For | Large, infrequent transactions | Small, frequent payments |
For crypto gaming, Lightning is often the best option for deposits and withdrawals because the amounts are typically small and speed matters. On-chain transactions make more sense for large deposits or long-term storage movements.
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Deposit BTC InstantlyIt depends on the fee you pay and network congestion. With a competitive fee during normal conditions, your transaction will typically be included in the next block (~10 minutes) and have 6 confirmations within an hour. With a low fee during congested periods, it could take hours or even days. Lightning Network transactions are essentially instant (under 1 second).
Practically, no. Once a transaction has 6 confirmations, reversing it would require controlling more than 50% of the entire Bitcoin mining network's hashpower — which is economically unfeasible. With 0 confirmations (unconfirmed), a double-spend is theoretically possible but extremely difficult. This immutability is one of Bitcoin's core features.
Bitcoin block space is limited (roughly 1-4 MB per block). When more people want to send transactions than can fit in the next block, they compete by offering higher fees. This creates a fee market that fluctuates based on demand. Weekends and late nights (UTC) tend to have lower fees. Major market events and NFT mints can spike fees dramatically. Always check a mempool explorer before sending.