Internal Transaction

An internal transaction has two common meanings in crypto. On Ethereum and similar networks, it is a transfer of value or a call between smart contracts that happens while another transaction is being executed. Only a user's account can start a transaction, but the contract it calls may send ether to other addresses or call further contracts. These follow-on actions are not separate signed transactions and are not listed as such in blocks; blockchain explorers reconstruct them by tracing execution and show them under "internal transactions", which is why a wallet's balance can change without an obvious incoming payment. The second meaning is a transfer between two customers of the same exchange or custodian, which is recorded on the firm's own ledger instead of the blockchain, similar to on-us transactions in banking. Such transfers are fast and usually free but rely on the operator's records. Also see off-chain transaction.