Bitcoin Transaction – Introduction
A Bitcoin transaction is simply the transfer of Bitcoin from one Bitcoin address, to another. Since it was developed, Bitcoin has had a high level of acceptance worldwide, one of the main reasons is the ease with which its users carry out a Bitcoin transaction.
Bitcoin was created as a peer-to-peer digital currency, so one of its main aims, is to create an easy way to send and receive Bitcoin, and it beats the previous system of money transfer (through banks), because the whole process is very transparent, in fact, every Bitcoin transaction you make, is electronic and is displayed publicly in a digital ledger, known as a Blockchain.
How does a Bitcoin transaction work?
I have always thought it important that a person should know and understand how it works, and the whole process is not so complicated.
The first thing to note is that there are no Bitcoins, there are only records of the transactions. Bitcoin is a cryptocurrency, and unlike cash or fiat money, it is not visible or there, it does not even exist as a digital file. It can be said to exist in special virtual vaults, with cryptographic keys.
However, there is a Blockchain, which resembles a digital spreadsheet, or ledger, containing all the Bitcoin transactions that have ever been carried out between various Bitcoin addresses. As each transaction takes place, the record of transactions is updated on the Bitcoin Blockchain, by the Bitcoin network and every node receives this update, so that balances of Bitcoin in every wallet, increases or decreases.
Think of it as a publicly broadcasted, self-updating transaction system, which cannot be modified at any time.
How do I read a Bitcoin transaction?
The transaction has three parts:
- An input, which is a record of the Bitcoin address from which the sender received Bitcoins in the first place.
- The amount, which just shows how much Bitcoin, is to be sent to the receiver.
- An output, which is the receiver’s Bitcoin address. The output is the public key of the receiver.
A Bitcoin transaction shows that someone sent an amount of Bitcoin, to another person. Blockchain transactions usually have a hash code; this is a long alpha-numeric code which can be sent to anyone, for the transaction to be viewed.
While a Bitcoin wallet address serves as the “account number” of the Bitcoin user, the hash code, serves as a transaction receipt.
Blockchain & Bitcoin Transaction
A bitcoin transaction is “ideally” fast, especially when large amounts of Bitcoin are involved, a transaction should be completed within 10 minutes. This is so, because, since there is no third party involved in Bitcoin transactions, Bitcoin miners verify and confirm every transaction in the Blockchain. To verify a transaction is to check if the amount someone says he sent is actually what he sent. For a Bitcoin transaction to be completed, a minimum of three miners must confirm a transaction.
You will be charged a very small transaction fee, which is used to pay the miners for their job. This transaction fee is adjustable and serves as an incentive to prioritize a transaction, therefore, if you want a miner to take out your transaction quickly from the memory pool (mempool) and confirm it, you need to pay larger transaction fees. Nonetheless, it is not always compulsory to pay transaction fees.
The whole Bitcoin transaction process, aims at being transparent, yet anonymous, just so that your Bitcoin experience, remains very secure.
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