How Bitcoin Transaction Works

Input and Output

A Bitcoin transaction has 3 primary components:

• Inputs: The coins being spent as part of the transaction.
• Outputs: The payments being made, including the receiver’s address and amount.
• Headers: Standard fields included on every transaction such as version info.

Although it would be possible to handle coins individually, it would be unwieldy to make a separate transaction for every cent in a transfer. To allow value to be split and combined, transactions contain multiple inputs and outputs. Normally there will be either a single input from a larger previous transaction or multiple inputs combining smaller amounts, and at most two outputs: one for the payment, and one returning the change, if any, back to the sender —Satoshi Nakamoto, Bitcoin white paper

Multiple Inputs and Outputs

If the transaction contains multiple inputs, this means the amount is coming from different bitcoin addresses. Having multiple output means, funds are being distributed to different wallet addresses.