HomeGuideHow Does crypto-currencies Transactions Work?
How Does crypto-currencies Transactions Work?
September 4, 2020
INTRODUCTION: the first Crypto-currency is Bitcoin it was created by Satoshi Nakamoto in 2009 as a “peer-to-peer electronic cash system, many platforms and exchanges have simplified the process for us—handling the more technical aspects so we can just enjoy buying and spending our Coins. But do you really understand what happens in a blockchain transaction? in this Guide I am going to Use bitcoin as an example
Each transaction consists of three main parts: an input, an amount, and an output.Let’s say that you’re trying to send Bitcoin BTC to Me The inputrefers to the BTC address of the sender as well as a record of where these coins have been. In this case, it’s your wallet address and the record of the coins inside. The amount is how much BTC you’re trying to send to me. Lastly, the output is the address of the wallet receiving the BTC my wallet address.
If you wants to send me some BTC, you has to publish your intention to do so, and then the network will validate that transaction. The network first validates that you has enough BTC to send to me and then checks if you hasn’t already sent it to someone else. Once validated by the network, the transaction gets clumped into a block with other transactions and attached to the blockchain. Transactions that are added onto the blockchain then become tamperproof and irreversible because it means having to re-do transactions on the succeeding blocks.
Let go deeper
The thing about bitcoin transactions is that although BTC is sent to and from bitcoin wallets, these “wallets” don’t actually store BTC. Instead, they hold bitcoin addresses—records of all your transactions. Bitcoin addresses look like 34-character long strings of letters and numbers, and are also known as your public key. This is the address that you share with people when you want to receive BTC. Each public key has its own corresponding private key—a string of 64 letters and numbers that you use to “sign” transactions.
Think of your public key as an email address and your private key as your password. Your email address is okay to share because that’s how people send emails to you, but you can’t share your password because then they’ll be able to read all your emails. Public and private keys are essentially the same, but instead of emails, it’s access to your BTC.
After inputting all the transaction details (the amount and my wallet address), you inputs your private key into the Bitcoin software to “sign” the transaction, which gives the green light to send the money. At this point, the transaction is up for validation by the network. The network will then check if the signature (private key) matches its corresponding public key. If it matches, the miners will validate the transaction. Once you and i get like three confirmations on the transaction, the data is added onto the blockchain, and i will be able to use his newly-acquired BTC however it pleases me. As a reward for validating the trade, miners are rewarded in BTC per block solved.
With the technology behind Bitcoin, you can think of your bitcoin address as a transparent safe—everyone can see what’s behind the safe, but only you can access it.
How long does a bitcoin transaction take?
The speed of Bitcoin transactions vary, and it depends on several factors. It’s important to remember that alltransactions need to be verified by the miners on the blockchain. When the queue is overloaded, your transaction doesn’t always make the cut for the current block. Instead, your transaction is put on hold until the next block is assembled.
Another factor of long confirmation times is the size of Bitcoin blocks. Although there’s always the chance of block size being increased in the future, the current Bitcoin protocol limits blocks to a size of 1MB. This limits each block to a certain number of transactions. That, in turn, can slow down confirmation times and as a result, the entire Bitcoin network is slowed.
In some cases, the speed of your transaction boils down to the blockchain processor you’re using. for example bitGo, the most secure and successful blockchain processing service in the world.
Internal vs. external transactions
Transaction speeds may vary depending on the kind of transactions you’re making.
For example, if you send BTC from one Exchenge wallet to another Binance wallet (internal transactions), the transaction is instant. However, if you’re sending BTC from a binance wallet to luno wallet (external), you need to have the transaction confirmed by the Bitcoin network. If you’re having trouble with external transfers, you can always check the bitcoin transaction status and see what to do from there.
Platforms like luno can help you buy small amounts of bitcoin, making internal transactions effortless and inexpensive.
Bitcoin transaction fees
For their service in verifying your transactions, miners are rewarded with bitcoin transaction fees. These fees are calculated in different ways, depending on the platform you’re using.
These fees cover the miner fees that come alongside bitcoin transactions as well as the maintenance of the wallet’s infrastructure.
For internal transactions, sending BTC is free of charge for some platforms .
Now that you have understand how blockchain transactions work, you can start sending and receiving Cryptocurrencies at full capacity. There are thousands of trusted wallet platforms around the world! Click Here