Bitcoin Block Explorer: how to read a cryptocurrency transaction
December 23, 2021
Block explorers are a key tool because they allow anyone to see the transactions recorded on the blockchain and also verify their own movements.
How does a Block Explorer work?
A “blockchain explorer” is software similar to an internet search engine (e.g. Google or Bing), allowing you to search the blockchain and view all the details of a transaction or smart contract.
But how does this website communicate with the blockchain?
Users, through their search on the explorer, create requests to the software (providing “input”), which then queries the nodes of the Blockchain, and the information is then returned to the software which, thanks to the API, interprets the information and returns to the user (the “output”) a graphic or numerical representation with the results of the request initially sent.
This acronym stands for Application Programming Interface and indicates the set of programming tools that large IT companies provide to developers to facilitate the creation of all kinds of applications.
Each cryptocurrency is based on a blockchain, and each blockchain has a specific explorer, for Bitcoin and Litecoin the most famous is Blockchain.com, for Ethereum it is Etherscan.io and for Binance Smart Chain it is BSCscan.com, but there are also explorers that aggregate information from many different blockchains, such as Blockchair.com.
How to use a Block Explorer in daily operations
For anyone using cryptocurrencies across different wallets and services, it is very useful to consult an explorer.
Let’s look at a very common practical case:
Sending Bitcoin from my Wallet A to Wallet B
After following the best practices for wallet security, here’s how to properly execute a transaction, and use the block explorer to track it.
- Make sure the recipient’s address matches exactly where you want to send the Bitcoins.
- If you are sending Ripple or Stellar, you should make sure to enter the memo, also called the destination tag.
- After checking the address, memo, and amount, send or withdraw.
- After 1-2 minutes, copy the transaction ID (or hash) provided by Wallet A and enter it into the blockchain.com search bar.
- You will see an unconfirmed transaction (it is still in the Mempool) and you can read how many confirmations are needed to complete it.
- If you refresh the page, after about 10 minutes blockchain.com will show the transaction as confirmed, or (in rare cases) as failed.
Once confirmed, the transaction is no longer reversible, and if it fails it means that it has been in the mempool too long, without being mined. So it has not been executed and Wallet A still has the same Bitcoins as before.
The same check can be done from the perspective of Wallet B, so in case you are making a deposit of cryptocurrency or receiving it from someone. By having the transaction ID, you can view the status of the transaction, or if you know the address you can see what transactions Wallet A has made or is making.
Why are there 2 outgoing amounts in Bitcoin transactions?
This is due to the specific functioning of the Bitcoin blockchain and of “UTXO” blockchains in general.
In the Summary of the transaction you will have this data, highlighted in the image below:
- Transaction Hash (or ID)
- Network Fee
Input and Output and do not really correspond with the amount you sent.
Seeing different figures than those entered is therefore normal:
- The digits on line 2 (input) is the total balance of your wallet
- The digits on line 4 (output) are respectively
- The amount sent
- The difference between the total balance and the amount sent, which is your “change“.
The address to which the “change” was sent is your “change address“, which is one of the addresses that make up your wallet address, the one you normally use.
At the moment you don’t need to know why Bitcoin works like this or what the change address is because it is very rare that you have to use it.
Other useful information on block explorers
Block explorers are our window into whatever is happening on the blockchain, and can be used as a source of many different pieces of information:
- Transactions – you can check the transaction history of any address on the blockchain, or the total daily transaction volume, trade volume and new transactions in real-time;
- Mempool – collects transactions waiting to be recorded on the blockchain;
- Blocks – you can view all information about the blocks of the entire chain from the beginning (the first block is usually called a “genesis block”), the size of the entire Blockchain, size of individual blocks, number of average transactions per block, average confirmation time etc;
- Technical information – such as transaction fee history, difficulty of mining, computational power derived from mining (it is called hashrate) and its geographical distribution, miners’ rewards etc;
- Smart contracts – for blockchains that support them, it is possible to view all the information of a smart contract. For example, I can search for a token to see its smart contract and view lots of information about it.
So if you take an ERC-20 such as a USD Coin, you can look it up on etherscan.io and see all the data about the token, such as the circulating supply, the most recent transactions and under “Holders” the addresses of the wallets that own it and the smart contracts on which a certain amount is locked.
Advanced Blockchain analysis
Although the explorer may look like a simple website, it has great potential, so much so that in recent years companies have sprung up to carry out very advanced and complex analyses of blockchain with them.
By linking several different types of data and then processing them, it is possible to obtain very valuable information that is apparently invisible at first glance.
An example is Chainalysis, an American company that supplies data, software, services and research to government agencies, financial institutions, insurance companies and computer security companies.
The analysis that can be carried out on a public Blockchain has such a high potential that many traders (institutional and non-institutional) use a technical data-driven approach to guide their operational choices, in a nutshell applying the fundamental analysis well known in the world of classical finance to cryptocurrencies. All this is possible thanks to the explorers of the Blockchain.
The evolution of the explorers goes hand in hand with the technological development of the Blockchain itself, in fact the more functions the developers will implement, the more information will be possible to obtain thanks to the explorers.