Bitcoin Block Explorer: how to read a cryptocurrency transaction
January 31, 2023
Data stored on blockchain can be ‘read’ because this ledger is transparent and (often) public. Every tool that allows you to consult cryptocurrency databases is called a blockchain explorer: let’s find out what it is, how it works and how many types exist.
What is a Blockchain Explorer and how does it work?
A Blockchain Explorer is a search engine, but it is not used to browse the Internet: instead, it inspects the blockchain, displaying data on cryptocurrency transactions, wallets and smart contracts. Also called block explorer, it is in fact a website that displays information recorded on the blockchain, usually through a user-friendly interface. In a nutshell, this describes what a blockchain explorer is, a tool that allows these public and shared databases to be truly transparent and searchable. Indeed, without dedicated software, it would be difficult to ‘read’ the data of Bitcoin blocks, for instance. Let’s see how a blockchain explorer works.
The user, via the explorer’s search bar, sends queries to the software, which, in turn, queries the nodes of the blockchain, looking for the requested information. An answer is then provided to the block explorer which, thanks to APIs, interprets the data and returns it to the user through a graphic or numerical representation.
In particular, the information that is already available on the homepage or in specific sections of a blockchain explorer concerns these aspects:
- Transactions – it is possible to check the transaction history of any address on the Blockchain, as well as to monitor trades in real time and have an estimate of the total daily volume;
- Mempool – collects transactions waiting to be recorded in the blockchain, the explorer reports on them;
- Blocks – you can view all the information contained in the blocks of the entire chain, reconstructing the history back to the genesis block. The explorer also evaluates the size of the entire blockchain, the size of individual blocks, the average number of transactions per block, the average confirmation time, etc;
- Smart contracts – for blockchains that support them, it is possible to view all the information of the software built on them, i.e. the smart contracts. For example, I can search for a utility token or stablecoin to find the smart contract through which it was issued.So if we look at an Ethereum ERC-20 token like USD Coin, for example, we can look it up on etherscan.io and see all the data about the token, such as the circulating supply, the most recent transactions, the wallet addresses that hold it (Holders) and the smart contracts in which a certain amount is locked.
Types of blockchain explorers
We have briefly explained how a blockchain explorer works, however the process outlined is generic because there are different types; in fact, there are many kinds of chains and protocols. In this regard, we can identify 4 macro categories of block explorers:
- Layer 1 explorers – They read and ‘query’ independent blockchains, which do not rely on any other infrastructure, such as Bitcoin, Ethereum, Polkadot, Cardano or Avalanche. Popular examples of explorers for these networks are in order: Blockchain.com, etherscan.io, explorer.polkascan.io, cardanoscan.io, subnets.avax.network.
- Layer 2 explorers and protocols – These refer to Layer 1 dependent chains, multichain or cross-chain projects. Examples are The Graph and Chainlink, with the subgraph explorer thegraph.com/explorer and the oracle request explorer.chain.link.
- Explorer for NFTs – useful since NFTs have much more metadata to consult than a simple cryptocurrency transaction, and are sold in different marketplaces. Examples are NFTScan or DappRadar, but there are also those specifically for NFT domains, such as the Web3 WHOIS, developed by Freename to simplify the search for NFT domains issued through the registrars Unstoppable Domains, ENS and Freename itself.
- Aggregators – explorers that collect information from many different blockchains or protocols, such as Blockchair.com or defiscan.live.
How to use a Blockchain Explorer
Now that we know what a blockchain explorer is, how it works and know the main types, we could try using one. For anyone who simply owns cryptocurrencies, and thus has a wallet, or uses Decentralised Finance (DeFi) services, it is a very useful tool. However, to use a blockchain explorer to its full potential, it is necessary to know how the two main chains work, which are already radically different: Ethereum and Bitcoin.
Perhaps you already know the difference between Proof-of-Stake and Proof-of-Work, the consensus mechanisms on which the aforementioned blockchains are based: in practice, Ethereum’s block creation is based on staking, whereas Bitcoin’s blocks are generated by mining.
There is, however, another difference, less known simply because it is more technical: Ethereum exchanges are based on the ‘Account’ model, while Bitcoin transactions respond to the ‘UTXO‘ model. This means that the ‘accounting’ of the two distributed ledgers is handled differently. In particular, the former bases its accounting on the balance of each wallet, while the latter on the distribution of the total availability of coins, in the form of inputs and outputs.
We will find these terms referenced in the interfaces of the respective blockchain explorers, the use of which we will explain in the following paragraphs.
How to check your transactions on the blockchain
In general, the following basic data can be checked using any block explorer:
- Transaction hash – the cryptographic identification code of the individual transaction
- Status – the confirmation and execution status of the transaction
- Fees – different types of fees, depending on the blockchain
- Timestamp – the time the transaction was sent to the network
- Wallet addresses – of senders and recipients
Knowing this data can be useful when sending or receiving a transaction, as it helps to monitor these processes. Here’s how to use this information:
- Make sure that the recipient’s address is exactly the one to which you want to send the crypto.
- If you were sending Ripple or Stellar, you should make sure to also include the ‘memo’, also called destination tag.
- After checking the address, memo, and amount, confirm the sending/withdrawal.
- After 1-2 minutes, copy the transaction ID (or hash) provided by the sender wallet and enter it into the search bar of the dedicated blockchain explorer.
- You will see a transaction, probably unconfirmed (still in the mempool) of which you will be able to check the time it was sent, as well as assessing that all relevant data are correct.
- Upon refreshing the page, after a few minutes the explorer will indicate the transaction as confirmed, or (in rare cases) as failed.
Once confirmed, the transaction is no longer reversible, because it is immutably recorded on the blockchain. The failure of a legitimate transaction is usually due to network congestion. A transaction is also rejected if it is deemed irregular: the network of a blockchain recognises fraud attempts, such as double-spending. In both cases, the exchange is not executed and the wallets of the sender and receiver will have unchanged balances.
The same check can be performed from the perspective of the destination wallet, so if you are depositing cryptocurrencies or receiving them from someone. By having the transaction ID, you can view its status, or if you know the sender’s address, you can see what transactions he has already made.
How to read Bitcoin transactions
On Blockchain.com, you can view blockchain details of Bitcoin, Bitcoin Cash but also Ethereum, although it is more popular for BTC and its main hard fork. Let us therefore consider sending Bitcoin, an operation based on UTXO as anticipated. In fact, we will use special terms to describe how the blockchain explorer works in this case:
- Input – is the total balance of the sender address, in this case that of your wallet
- Output 1 – the amount sent.
- Output 2 – the difference between the total balance (input) and the amount sent (output 1), which constitutes the ‘change’.
- Coinbase – is the first transaction of each block, containing the reward for the miner who created it. If ‘Yes’ is written next to this field, it means that this is the first transaction of the block.
- RBF – If this field is filled in with ‘Yes’, it means that the sender has chosen to pay a higher fee to speed up the execution of the transaction. This is possible only while the transaction remains in the mempool.
In addition, you will often find a lot of data on mining on the explorer homepage, such as the difficulty of mining, the computational power of the hardware running it (hashrate), their geographical distribution, the miners’ earnings, and much more.
How to read Ethereum transactions
Since Ethereum’s blockchain is based on the Account Model and supports smart contracts and tokens, what can be found on EtherScan for ETH is different from Bitcoin explorers:
- Gas fee – the fee required to execute any transaction on Ethereum, expressed in ‘Gwei’.
- Gas price – the current price of Gas in Ether
- Burnt & Txn Savings Fees – an entry that appeared after the Merge, indicates the number of ETHs burnt with each transaction, in practice removing the fractions of coins used to pay fees from the circulating supply.
- State – not a transaction field, but a section of it. This is where the updated ‘state’ of the balances of each account is recorded, upon completion of the transaction.
Beyond explorers: on-chain analysis
Initially, a blockchain explorer might have looked like a simple site, but now that we understand what it is and how it works, we can realise its great potential. On this model, in fact, companies dedicated to advanced blockchain analysis have sprung up in recent years.
By connecting several types of data and subsequently processing them, in fact, it is possible to obtain much more in-depth, valuable and apparently ‘invisible’ information at first glance. One example is Chainalysis, an American company that provides data, software, services and research to government agencies, financial institutions, insurance companies and IT security companies.
The analysis that can be performed on a public blockchain has such a high potential that many traders (institutional and otherwise) use an on-chain data-driven approach to guide their choices. In a nutshell, they apply fundamental analysis to cryptocurrencies, which is already well known in classical finance, alongside the observation of charts (or technical analysis). All this is only possible thanks to blockchain explorers.
The evolution of blockchain explorers goes hand in hand with the technological development of the blockchain itself, in fact, the more functions the developers go on to implement, the more information can be obtained thanks to ‘blockchain explorers’. Meanwhile, we can reconstruct the complete history of cryptocurrencies, as well as predict certain events with blockchain explorers: for example, in how many blocks will the halving of Bitcoin happen?