What validates your right to spend UTXOs?

Signatures (e.g., ECDSA/Schnorr) prove you control the private key for the UTXOs being spent.

Where do transactions wait before inclusion?

Nodes keep policy-accepted, unconfirmed transactions in the mempool.

How is the on-chain fee calculated for a transaction?

Fee = total inputs − total outputs. Wallets typically target a feerate in sat/vB.

What does opt-in RBF (BIP125) allow you to do?

RBF lets you replace your own unconfirmed transaction by broadcasting a version with a higher feerate.

What is CPFP primarily used for?

Child-Pays-For-Parent uses a high-fee child to pull a low-fee parent into a block via package feerate.

Miners generally prioritize transactions based on…

Feerate, not absolute fee, maximizes revenue per vbyte of block space.

Which output sends leftover value back to the sender?

Change returns excess input value to a new UTXO controlled by the sender’s wallet.

Transaction Lifecycle

12 min readarticleIncludes quiz · 7 questions

High-level flow:

1) Create: Wallet selects inputs (UTXOs), builds outputs (recipient + change), and sets a fee 2) Sign: Inputs are signed with your private key(s) under specific SIGHASH rules 3) Broadcast: Wallet sends the raw tx to a node (yours or a public node) 4) Propagate: Peers validate policy/consensus rules and relay to the network 5) Mine: Miners select by feerate and include in a block 6) Confirm: Block is accepted by the network; more blocks = more security

Transaction anatomy (definitions):

•Inputs (vin): references to previous UTXOs being spent
•Outputs (vout): new UTXOs created, each with a locking script and amount
•Change output: returns leftover value to your wallet
•Fee: inputs − sum(outputs); set by you (directly or via feerate)
•txid vs wtxid: txid excludes witness data; wtxid includes it (SegWit)
•locktime/sequence: enable absolute/relative timelocks
•ScriptPubKey/ScriptSig/Witness: spending rules and data

Signing & SIGHASH modes:

•SIGHASH_ALL (default): signs all inputs/outputs
•SIGHASH_NONE/SINGLE: sign subsets of outputs
•ANYONECANPAY variants: limit which inputs are signed

Relay policy & mempool basics:

•Standardness: nodes relay only standard, policy-compliant txs
•Min relay feerate: too-low fee txs may be rejected
•Ancestor/descendant limits: bound package size/depth
•Replace-By-Fee (BIP125): opt-in replaceable txs can be fee-bumped
•Package/CPFP: a high-fee child can pull a low-fee parent into a block

Miner selection:

Miners primarily sort by feerate (sat/vB), not absolute fee. They may also consider packages (parent+child) when it increases total paid per vbyte.

Confirmations and security:

•0-conf: seen in mempool (reversible)
•1 conf: included in the latest block
•2–3 conf: increasingly secure for medium value
•6 conf: industry standard for high-value finality

Common failure modes & fixes:

•Too-low fee: stays unconfirmed or gets evicted → use RBF or CPFP, or rebroadcast with higher fee
•Non-standard script/size: won’t relay → adjust to standard policy or mine via private connections
•Double-spend conflict: competing tx seen → wait for confirmations; use RBF intentionally when you control original tx
•Malleability (legacy): txid can change before confirmation → use SegWit to avoid

Example

{
  "vin": [ { "txid": "<prev>", "vout": 0, "sequence": 0xFFFFFFFD } ],
  "vout": [ { "address": "bc1...", "value": 100000 }, { "address": "change_bc1...", "value": 389000 } ],
  "fee": 1000, // sats
  "locktime": 0,
  "witness": [ "<sig>", "<pubkey>" ]
}

Test Your Knowledge

This lesson includes a 7-question quiz (passing score: 80%).

Quiz functionality available in the mobile app.