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How Do Bitcoin Transactions Work?

How Do Bitcoin Transactions Work?

Knowledgebase
03/02/2020 by Koinal
691
If you learn how bitcoin transactions work, you will understand that it’s impossible to steal your Bitcoin wallet unless you are careless about it.
Bitcoin Transactions

Are you afraid of investing in bitcoin because of the dark web? Well, if you know how bitcoin transactions work, you probably might understand that it’s impossible to steal your Bitcoin wallet unless you’re careless about it.

Bitcoins can be bought or mined. No matter how you obtain the bitcoins, they would eventually be stored in a wallet that will be accessible to you only. This wallet can exist on an exchange or it can be a physical device that stores your encrypted key.

Since bitcoin is an encrypted digital currency, that has no physical form, bitcoin transactions involve the use of encryption with two parts – a public key and a private key.

A public key is visible to all and is a string of 34 characters. On the other hand, a private key is a unique combination of 64 characters, that is only known by you. If you make the mistake of sharing your private key with unknown people, your bitcoin wallet is in danger.

Understanding the Bitcoin Blockchain

The introduction above will now help you understand the bitcoin blockchain. For this, let us assume that you want to purchase a bitcoin from Koinal using regular fiat currency. You will first need a bitcoin wallet for that.

Once you set up your wallet, this is how the transaction will take place:

Step 1: You’ll visit our website or any of the partner exchanges (Binance or Okex) and place a purchase request.

Step 2: Once you begin the purchase process, you will get to know the current conversion rates for bitcoin which allows you to figure out how much fiat money you will require to complete the purchase.

Step 3: By confirming the transaction you initiate the purchase request. The transaction message first goes through the bitcoin network, which consists of all the current bitcoin wallet owners, a public ledger and bitcoin miners.

The public ledger consists of a chain of bitcoin transactions that have taken place since the bitcoin exchange began. The minor adds your unconfirmed transaction to the previous block and begins confirming the validity.

The minor verifies the authenticity of your digital signature and public key, which is known as the proof of work. He then confirms your transaction, adding another block to the previous transactions. In return, he receives transaction fees.

The ledger will only contain the public key and the amount, so your privacy remains intact as no other information is there.

Step 4: Once you get all your transaction confirmations, you will receive bitcoin. The confirmation times depend on the amount of bitcoin you have sent the receiver.

So, it is actually after a lot of complex work that takes place in step 4 when a person receives money through bitcoin. However, you must consider the fact that the transaction is irreversible. So, you need to be careful about two things:

So, it is actually after a lot of complex work that takes place in step 4 when a person receives money through bitcoin. However, you must consider the fact that the transaction is irreversible. So, you need to be careful about two things:

  • You do not make any mistakes while making your transaction.
  • Make sure your private key is intact with you. No one should see it, not even anyone trustworthy.

The bitcoin network is a very safe space for making transactions – whether big or small amounts. Do you still hesitate in making bitcoin transactions?

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