Understanding the Working of Bitcoin Transaction
Almost everyone in the world got introduced to Bitcoin in 2020. During the pandemic-led shutdowns, people started investing in this virtual currency. The demand for cryptocurrency transactions increased drastically. As a peer-to-peer electronic currency, Bitcoin is dominating the payments technology around the world. However, most of us are yet to understand the technical aspects of Bitcoin transactions fully. It is important to know the working process of buying and spending a Bitcoin (BTC).
Understanding Bitcoin Transaction
Whether it is 1 BTC or 10 BTC, the process of Bitcoin transactions is the same. It is standardized on three levels, the input, the amount, and the output. If a person wants to send some bitcoin to another person, then the BTC transaction gets completed in the following way:
- Input: The sender has to record the BTC address from which they initially received the Bitcoin.
- Amount: The sender needs to specify the amount of BTC tokens to be sent to the receiver.
- Output: The receiver gets the public key, also known as the ‘Bitcoin address’ for their end of the transaction.
This is how every Bitcoin transaction takes place.
Working of Bitcoin Transaction
The most important part of any Bitcoin transaction is the BTC address. This is denoted by the public key and the private key. While sending BTC, the user requires access to the public as well as the private keys linked to that specific amount of BTC being transacted.
Now, if there are multiple Bitcoins to be sent, then the users must have access to a key pair. It includes:
- A public key, the address of the BTC sent previously.
- A corresponding private key, the unique authorization of the previously sent BTC to the forwarded address.
Here, public keys are commonly referred to as Bitcoin addresses. They are random sequences of numbers and letters that function like an email address or a website username. Every public key is available to the public and safe to share with others. To get BTC, every user must give their Bitcoin address to others. The private key, on the other hand, is another sequence of numbers and letters. The only difference is that private keys work like passwords to public keys. They need to be kept secret at all costs.
How long does a Bitcoin Transaction take?
The speed of Bitcoin transactions varies based on the amount being transacted. The speed also depends on several factors, but verification of the Bitcoin miners’ transactions is very important. The blockchain verification status determines how long the Bitcoin transaction will take. If the verification queue is packed, the transactions may not get cleared for the current block. In such cases, some transactions will be put on hold for the next block being assembled.
Time for Bitcoin transactions also depends on the confirmation period and the Bitcoin block size. As the block size gets increased, the transactions become slower. The current Bitcoin block size as per the protocol limits is 1MB. As per this size limit, each block can only confirm a specific number of Bitcoin transactions. When the confirmation rate slows down, the entire Bitcoin network of transactions gets impeded.
Bitcoin Transaction Fees
To calculate Bitcoin transaction fees, several factors are considered. Some Bitcoin wallets or crypto wallets charge negligible fees to small Bitcoin transactions. For example, 0.0001 BTC transactions are charged with $0-$9.99 fees, while $10-$19.99 fees are charged on 0.0002 BTC transactions. They also allow users to set their transaction fees manually. Some wallets charge the recipient a portion of the transaction as the fees. Most fees get forwarded to the Bitcoin miners, who repurpose them to speed up the confirmation process and incentivize their priorities based on the transaction fees.
A Bitcoin transaction is a simple yet steadfast process. The working of a Bitcoin transaction is easy to understand. However, it is important to protect the private keys of every Bitcoin transaction. It is also important to ensure that the blockchain used for the Bitcoin transactions has enough space and capability to complete the transaction instantly. Similarly, it is important to find a wallet that charges low Bitcoin transaction fees for the users. Apart from that, If you are interested in Bitcoin and want to invest in Bitcoin then you should choose a secure platform like Bitcoin Pro. It is the most trusted Bitcoin robot that helps you to earn a good profit from Bitcoin.