This story was originally published on HackerNoon at: https://hackernoon.com/how-transactions-work-in-bitcoin-explained-like-youre-5-years-old.
Understanding 'state' and proof-of-work in Bitcoin.
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Bitcoin is digital money and to understand how transactions work with Bitcoin, you need to have an idea of how they work in the traditional system. To send money to someone's bank account, you'll need: Two accounts - the receiving and sending accounts. A signature of some sort to prove that you're sending the money with your consent- this could be a pin or ID verification. A program is set up to prevent you from sending more than you have or using the same money for two transactions (double spending)