How Do Bitcoin Transactions Work?
Nowadays, making a Bitcoin (BTC) transfer or purchase on reputable crypto exchanges like Bitprive is as easy as clicking one button. Have you ever asked yourself how does a BTC transaction actually work? What happens after the click and why is it so secure?
The Transaction Process
Each transaction can be broken down into three parts: input, amount and output.
Input: the BTC address of the sender and this also serves as a record of the origin of the BTC transaction.
Amount: the amount of BTC to transact.
Output: the receiving wallet address.
So, simply put. When there is an input, the blockchain will perform validation of whether there is enough balance to support the amount. Once validated, the transaction will enter into the blockchain and will become irreversible and cannot be tempered with.
Now, we have a brief idea of how a BTC transaction works, you would think BTC wallets actually store the BTCs. No, that is not correct. BTC wallets don’t actually store the BTC, they simply act as a storage for the BTC addresses – the record of all your BTC transactions. BTC addresses are 34-character long, containing letters and numbers, often referred to as public key. This is the key you give people if you want to receive BTC. Private keys are combinations of 64 letters that are used for “signing” transactions.
It might be confusing to talk about public and private keys. It is easier if you treat your public key as your bank account number and your private key is your password. So, it’s ok to share your public key as it is ok to let people know your bank account number, you should however never share your private key just as you wouldn’t share your banking password.
Lets say Nate wants to send Mick some BTC. Nate will have to input all the input, amount and output details, Nate would then input the private key to “sign” the transaction which allows the platform to send the BTC. Then, the network will begin the validation process it will check if the private key matches the public key. If it does, the miners will then validate the transaction. Once three confirmations are obtained, the transfer will be completed and the miners would be rewarded with BTC.
The speediness of BTC transactions depend on multiple factors on various levels. Since all BTC transactions have to be validated and verified by miners on the BTC blockchain. Network overload can occur and when it does, the transaction would be paused until the next block on the blockchain is created.
Size does matter. We are talking about the size of BTC blocks. The BTC blocks are limited to the size of 1MB, it in turns limit each block to a finite number of transaction. The confirmation times can be slowed down due to this reason. Last but not least, blockchain processors are not all created equal. Bitprive works with BitGo to provide you with the most secure and speedy blockchain processing experience.
Internal transactions are quicker
Internal transactions are always quicker than external transfers. Internal transactions are the transfers that are made between Bitprive wallet addresses. So, if the sender and your recipient are both Bitprive users and are making transfers from a Bitprive wallet address to another Bitprive wallet address, the transaction is almost instant.
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Disclaimer: The content herein is not, and is not intended to be, legal, financial, investment, or other advice.
About Bitprive (BPVE)
Bitprive is a Blockchain startup focusing on developing a regulated global cryptocurrency OTC marketplace with 180+ popular payment methods in the world.
Verified users can list buy and sell offers on the Bitprive platform for multi-cryptocurrency trading with a wide range of digital and physical payment methods. On top of providing the platform technology and matching services, we also provide the BitEscrow Network where crypto is held in our Bitprive hot wallet before the payment is confirmed. Once the seller confirms payment, Bitprive releases the crypto from the BitEscrow Network to the buyer’s Bitprive wallet.
At Bitprive, we value security and efficacy.