How do bitcoin transactions work?

Let’s consider a simple operation of sending funds from one wallet to another. At the given operation there is no usual rewriting of balances from a purse of the sender on a purse of the addressee, and there is an interaction of your purse with a bitcoin network which result there is a record in system which guarantees that the necessary quantity of coins will pass from you, to the addressee.

Bitcoin transaction basics.

It is important to understand that Bitcoin is something virtual that cannot be touched. Bitcoin, it’s not just a single entry, somewhere in the ledger or in the account statement. Bitcoin is a registered transaction that consists of three elements: entry transaction, exit transaction and amount.

An entry transaction is a record that contains information about where the funds came from on the sender’s wallet.

An exit transaction is the address of the bitcoin to which the coins are sent.

The amount is the amount of coins to be sent.

Thus, it turns out that in the operation to enroll you in the bitcoin wallet there is information about the past wallet where the bitcoin was, and, accordingly, the past operation has similar information. Using these features, you can always keep track of the bitcoin transaction until it is created. These features create a transparent system in which all transfers can be checked at any time.

Features of sending funds in the system.

Bitcoin is a record of financial transactions in an electronic repository, i.e. there can be many of these records. Let’s consider an example.

Ivan has a wallet with 1 bitcoin from Gianni, 2 bitcoins from Lena and 4 bitcoins from Pasha. Ivan’s wallet doesn’t have 7 bitcoins, there are records of 1, 2 and 4 bitcoins. All these are different transactions and all bitcoins are stored separately.

Suppose Ivan needs to send 1.5 bitcoins to Andrei. The system tries to find a record with a suitable amount to send, or a combination of records with receipts to get 1.5 bitcoins, but in our purse there is no such thing. It is not possible to split already existing records, the system does not allow splitting. In this case the system will send 2 bitcoins, which Ivan received from Lena and Ivan will return 0.5 bitcoins back from Andrew. As a result, two transactions will be created: 2 bitcoins on an exit and 0.5 bitcoins back on an input.

Thus, the bitcoins can be divided. Bitcoin is divided into Satoshi, which is one hundredth of a millionth of a bitcoin. However, you will not be able to send only one Satoshi over the network, as this is a very small value and similar tiny microtransactional transactions can lead to a clogged network. The smallest acceptable transaction value is 5340 SATOHI, which is still quite small.

But that’s not all, many bitcoin transactions include a commission, which means adding a small amount of bitcoins to the transferred amount. Without paying the commission, there is a possibility that the bitcoin transaction will not be completed at all.

How long does it take to process a transaction?

The processing of the transaction is essentially nothing more than a network check of the transaction. The transaction is checked by miners who provide their computers for processing. Miners are charged a fee for providing these services. So, what factors make up the transaction processing speed.

  • The amount of commissions you have paid.
  • The amount of the transaction.
  • Network load at the moment.
  • Bitcoin rate jumps.
  • The software of the recipient of the funds.
  • All these factors can affect the time of completion of the transaction.

How do I cancel the transaction?

The Bitcoin system does not have a central control system where all transactions are controlled, so there is no way to cancel the transaction.

Where and how can I track a transaction?

Tracking a transaction can be easily done using any of the many public services. For example, Blockchain.info. You need to enter the address of the bitcoin purse or hash of the transaction into the search.

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