Steps Used by Your Wallet to Sign a Transaction
Step 1 — Transaction is Created
Your wallet builds a transaction containing:
- •The UTXO being spent
- •The recipient's address
- •The amount
- •The transaction fee
Step 2 — Transaction Data is Hashed
Before signing, the wallet creates a hash of the transaction using a cryptographic hash function:
- •SHA-256 (often applied twice — double SHA-256)
- •This produces a fixed-length transaction digest
Step 3 — Wallet Signs the Hash
The wallet signs the transaction hash using:
- •The private key
- •The ECDSA algorithm
This generates the digital signature:
Signature = Sign(Transaction Hash, Private Key)
The private key never leaves the wallet.
Step 4 — Signature is Added to the Transaction
The transaction now includes:
- •The digital signature
- •The public key
This information is placed in the unlocking script (scriptSig). The signed transaction is then broadcast to the Bitcoin network.