I'm a newbie, here is my understanding of how transactions are made and how we make sure how many BTCs an address own.

if I didn't get it wrong, how many BTCs a address owned is confirmed by the whole block chain, derived from all the existing transaction recorded in the block chain. and through the private key is how we sign our transactions and modify the content of a wallet ( or the seed? I'm not sure, are they the same stuff?)

so, the question is

  1. if we only have an address X, is that possible simply using X and the whole block chain to trace every single transaction of X, without other additional information? Which confuses me is that, I thought a transaction would be signed by a private key of the owner, and I'm not sure whether the block chain store the encrypted version of transaction only, or we have both the encrypted and the non-encrypted one in block chain

  2. how an address is linked to the owner's real identity?

    what i'm asking is much more like a scenario, if we buy BTC from a exchange, is the exchange the only possible way to investigate the identity? and in other websites I saw such terms like "connect your wallet to the Bitcoin network", what's that? does that mean we can trace a transaction by IP address?


2 Answers 2


A seed defines a collection of private keys, which in turn generate addresses.

Source: What's the difference between a seed (12 or 24 words) and a private key?

  1. You can trace every transaction because transactions are public information. But you only see the addresses and amounts, you don't know which person belongs to an address. For tracing transactions and addresses you can for example use https://blockchain.info. Transaction is signed by your private key to authenticate you and a hash is created. Blockchain stores: Input addresses (i.e. From), Output addresses (i.e. To), Amount of BTC sent and Hash. Hash is for validation that it's the owner who sends the money. No encrypted data is stored to blockchain.

  2. If you care about privacy of your IP address, you should use Tor (https://www.torproject.org/). Also for privacy you should use every bitcoin address only once.

But if you care not to be tracked, you should know that bitcoin transactions are different than normal transaction. Normal transaction is 1->1 meaning "from 1 address to 1 address". In bitcoin you can create 1->2 transaction meaning "from 1 address to 2 addresses" where one of those addresses is yours. If someone wants to track you then he don't know which of these addresses is yours, he can only guess based on the amount sent. This is often called Change address.

Example: Let's say you're an owner of an address where you have 0.05 BTC. And you're also an owner of address A. You wish to send 0.03 to X. You can send 0.03 to X and the rest 0.02 to A in one transaction. Nobody except you and the owner of X know which of these addresses is yours.

You should check: https://howtobuybitcoin.io/

You should definitely try several transactions to get the hang of it (transaction fees, confirmation times, change addresses, ...) before you buy more.

  • "IP of a node which relayed the transaction is stored into blockchain" The privately operated website blockchain.info stores the IP addresses of nodes that relay a transaction first. This information is not stored in the blockchain itself however, and is certainly not guaranteed to be correct. Commented May 1, 2017 at 16:41
  • "Your IP won't be logged if you don't use a full node." Quite the opposite. Full nodes are much better than thin clients at keeping your privacy protected, and thin clients are generally better than webwallets. Commented May 1, 2017 at 16:41

It is done through blockchain technology where each block gets the entry in the blockchain legder which you can check https://blockchain.info/.

All the transactions are public and you can check it.

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service and acknowledge you have read our privacy policy.

Not the answer you're looking for? Browse other questions tagged or ask your own question.