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How to conduct a Bitcoin transaction

2017-11-10 00:00:00

Many of our contemporaries, accustomed to paper banknotes, find it difficult to imagine that units of account may be deprived of physical embodiment. The very fact that cryptocoins in the form of an encrypted alphanumeric code can be so expensive is surprising. But nevertheless, it is a fact. For example, stock exchange quotes for the first of the cryptocurrencies, which is Bitcoin, at the time of this writing, have risen to a record high of $ 7,300 and, despite significant volatility (value swings), continue to grow steadily, setting new records.

Our story will be devoted to the consideration of the technical features of the implementation of Bitcoin transactions. Lets try to tell interested readers in understandable language about how money transfers are made in the payment system of the same name with the first cryptocurrency, based on a decentralized database called a blockchain.

General principles of operation

Technical standards for the implementation of money transfers in the Bitcoin system are an amazing unity of the complex with the simple, and due to the presence of innovative innovations, they have no analogues. Bitcoin transfers are carried out between different cryptocurrency wallets, and each of them has its own digital signature, which ensures the safety of transfers and the safety of funds of owners of virtual coins.

Another feature is the presence of unlimited access on the Web to information about any transaction, that is, everyone has the right and can find out how many coins the owner of one wallet sent and the storage number of the counterparty of the transaction, because the corresponding record is recorded in the blockchain blockchain. It is not difficult to track all Bitcoin transactions carried out in the system since its inception. However, the system ensures the safety of confidential information. Yes, it is possible to find out the number of the crypto wallet, but it is not possible to establish the identity of their owners if they do not declassify it themselves.

Most users see Bitcoin as a successful investment, and this is correct, because there is no other asset that has grown so much in price, but gradually the first cryptocurrency is also becoming a tool that is increasingly used for online settlements and remote shopping. So how are money transfers carried out in the Bitcoin system? Lets try to understand the details.

Bitcoin and blockchain records

Maybe many will be surprised by the fact that bitcoins, as such, really do not exist. They have no physical substance. Yes, crypto savings are located in special wallets, but they are all just software adapted to specific functional loads.

Bitcoin crypto coins and transactions replace the records in the blockchain, which are recorded from the day the project starts. The first money transfer was carried out by the creator of the new financial phenomenon, Satoshi Nakamoto, and the decentralized ledger remains and will remain unchanged, reproducing and storing detailed information about all, even tiny transfers in the first digital currency.

What is Bitcoin transaction?

Lets try to understand the essence of cryptocurrency transfers with simple examples. A transaction should be considered a business activity during which a certain number of coins or satoshi (an indivisible structural unit of a whole cryptocurrency) are sent to a counterparty. Each money transfer contains three types of information:

    Input or input is a parameter that records data from where (from which wallet) specific assets were sent to the user who initiates this transaction.
    Amount or amount - the amount of crypto funds sent by Bitcoin to the recipient.
    Output or output - the wallet address of the final recipient of the money transfer.

How are Bitcoins sent?

Each Bitcoin transaction becomes feasible only if two parameters are present: the recipients address and the private key. Some people unwittingly draw parallels between the address of a cryptocurrency wallet and an account available in an ordinary financial institution. But there is a minimal amount of similarity.

Unlike financial and credit institutions (banks), where you will have to identify your data and compile a whole heap of paper forms and forms, the registration of a wallet of virtual monetary units is carried out in incognito mode. The generation of the address is random and is a complex combination of letters and numbers that is in the public domain. Private keys have the same form, but they are no longer publicly available. It would be appropriate to compare the Bitcoin address with a transparent cell, the contents of which can be viewed, but it will not work to open and withdraw funds. Only the owners of the private key have access to digital assets.

The very mechanism of each Bitcoin transaction can be described quite simply:

some were discussed above.
    After that, you need to send a correctly composed application to the Bitcoin system from your wallet.
    Miners (computing nodes) will include information about the money transfer into the blockchain after a while, and the coins will be delivered to the recipient.

Why is there a delay in transactions on the Bitcoin network?

The miner phenomenon has a double information load. So it is customary to call:

    Computing equipment, which is used to perform complex arithmetic manipulations, thanks to the correct solution of which new digital coins are "born".
    Crypto miners who purchase such equipment and in parallel are engaged in the inclusion of information about each transfer in a block of a decentralized database.

 A bitcoiner, having decided to send a certain amount in cryptocurrency to a specific addressee, signs the transaction using private keys, indicating 3 types of data, about which Satoshi Nakamoto, the author of the standard algorithm for the first digital currency, provided that it takes 10 minutes to create each information block. However, if the user does not want to wait for the confirmation of the Bitcoin transaction, he can use the services of processing organizations, which imply the presence of a standard that ensures instant transactions for a certain fee.

A little about fees in the Bitcoin network

Bitcoin, at the beginning of its formation, positioned itself as a cryptocurrency and a money transfer system of the same name, providing fast, reliable and cheap transfers without limits, time, territorial and other types of restrictions. If 3-4 years ago there was an opportunity to make transactions without paying a bribe, then today, against the background of an increase in the number and volume of transfers, the system of the first cryptocurrency has encountered difficulties in the direction of the speed of transfers. Consequently, the commission rates charged by miners for the inclusion of information in the blockchain began to increase.

The calculation of the commission is based on various factors. As a rule, modern releases of different wallets contain a function that indicates the minimum desired indicator, which can be changed at will. To get a quick confirmation, each owner of virtual coins is free to put such a fee for the Bitcoin transaction, which he considers necessary. In this case, you can transfer both whole coins and parts in different quantities.

The time required to make transfers is not a static value and depends on a number of network parameters, which we will consider in more detail.

Factor one: Workload.

This parameter, against the background of the growth of quotations, volumes and the number of Bitcoin transfers, has significantly increased recently. There are times when you have to wait several days for confirmation. It has become a very common phenomenon when, due to the surge in the activity of Bitcoiners, the block size increases to a critical level, which is the reason for the large number of unconfirmed Bitcoin transactions.

Factor two: Low commission threshold.

Miners who receive remuneration not only by generating new crypto coins, but also by including a transfer in the blockchain block, aim at maximum benefit and give preference to those transfers that surpass their analogues in terms of commission.

Factor Three: Bitcoin Volatility.

Jumps in exchange rates do not play a secondary role in the quick implementation of transactions. Indeed, with their next growth, as usual, there is a peak in the activity of owners of virtual assets.
How to find out how many confirmations received from miners?

Everyone wants the money transfer initiated by them to go through as quickly as possible, but for this you need to receive 6 confirmations from the miners who certify the legitimacy of the transfer. Detailed information about the network load and how many confirmations of a particular Bitcoin transaction have been received can be found on the Blockchain.info website. The algorithm of actions looks like this:

    Follow the link: https://blockchain.info/ru/unconfirmed-transactions. Here you can understand the general parameters of the workload and system performance.
    For a specific transfer, you need to enter a known hash indicator in the search section and information about the next block of the blockchain that is being processed will become available.
    At the bottom there is a list of transfers pending confirmation from miners.
    The system notifies with a sound signal about the creation of each block, which will include your money transfer.

How to increase the speed of making a payment?

The speed of delivery of virtual coins to a counterparty can be increased in several ways:

    By increasing the commission, which allows you to reduce the time it takes to include a specific Bitcoin transaction in the blockchain of a decentralized ledger. It is recommended to bet an amount of 0.0002 Bitcoin or more.
    Often the speed depends on the amount sent. An acceptable option is to use special platforms where the confirmation of the transfer takes place within the system (for example, Coinbase.com), but you will have to pay a certain fee for this. ...

When making a Bitcoin transfer, you should be very careful not to send coins by mistake to a random recipient. How to cancel a Bitcoin transaction? There is only one answer to this question: this is not possible.
What advice can you give to users for fast and secure transfers in Bitcoin?

I would like to express my confidence that the article turned out to be informative, but we will try to touch upon the interests of those people who often need to carry out monetary transactions using crypto coins, in particular, to acquire them for various fiduciary, electronic assets or altcoins. Many people have no time to delve into technical details and wait for confirmation from the miners.

Conversion resources operating on the Web should be considered a worthy and profitable alternative. But even among the diversity, a cohort of leaders can be distinguished, to which the online exchanger Xchange.sh belongs. This site offers favorable terms of cooperation and charges a meager commission not only for carrying out Bitcoin transactions, but also for conversion manipulations in various directions.