Home Business The Theory Behind Bitcoin Transactions – 2020 Guide

The Theory Behind Bitcoin Transactions – 2020 Guide

by Victoria Boatright

When someone buys, sells, or transfers bitcoins through any means that is called a transaction just like while transferring money from a bank account to another bank account, which is also called a transaction, the transactions made in the banking system are not publicly available, While bitcoin transactions are publicly accessible and searchable, it is designed so that bitcoin miners can confirm and add them to the blockchain system.

There are three types of data available in each BTC transaction, the value of the transaction that processed the receiver’s address and the sender’s address after making a transaction that was first transferred to the network for verification to the bitcoin node, when the transaction process is completed after verification the data of this transaction remains in the nodes as an unconfirmed transaction in Mempool, which is a waiting area for unconfirmed transactions

This data is now in the form of a computational problem: puzzle miners take this data to create a competing block, miners verify this transaction through sender and receiver addresses to confirm that the sender is indeed an owner of bitcoin, some users attach transaction fees as a reward for miners if they successfully complete the verification process

Types of Bitcoin address

Source: oobit.com

The addresses that are used in bitcoin transactions are called public keys that are attached to the transactions and represent the address of the receivers and the address of the sender, these keys contain twenty-six to thirty-five characters in length and contain alphanumeric letters, there are three different types of addresses which are being used till the day

  • P2SH address starting with number three
  • Bech 32 address starting with bc1
  • P2PKH address which starts with number 1

The P2SH means pay to the hash of the script, this key is standardized in BIP 16, which allows sending the transaction to the hash of the script, except send it to a public key hash that increases some more security features with the transaction, Bech 32 is a SegWit address that uses block space more efficiently, was introduced by BIP0173, this address is mostly used these days and many wallets and users prefer this address to make the verification process quick and easy, the P2PKH is pay to public key hash address this was the most commonly used bitcoin address for transactions

Bitcoin receiving process

Source: wikihow.com

The process of receiving bitcoins is very simple, just like receiving a transaction in a bank, you need an account number and address, the same applies here to receive a bitcoin you must have an address called a public key, which is the address of bitcoin that is generated by online wallets through the main BTC platforms that provide digital currency services, with each new transaction the software generates a new address for security purposes

If the key will be the same for several different transactions from different senders of the same amount, they are carried out at the same time, who made these transactions will not be recognized, so with each transaction, a new key is always generated, while being a public key and open to the public on the blockchain, scammers or malicious can claim that they sent you the bitcoin, but not really and it will not be possible to verify this, to learn more please visit LearnBonds.

Bitcoin sending process

Source: cryptooof.com

To send a bitcoin to another person, you must prove that you are the real owner of it and it is not so easy because BTC is not a physical thing, being a peer-to-peer technology, there is no third party involved in these transactions. approve or reject the transfer process, to start this process you must have both the public and private keys related to the bitcoin you want to send or transfer

A bitcoin address is called public keys which are the same as an email address and are safe to share publicly, in fact, you must share these keys to send or receive the BTC, the private keys are actually a password to access your bitcoin treasure or wallet and send bitcoins to other places where you want to send, during the bitcoins sending process the private key is attached with a message containing the amount, the output and the input for the network of BTC

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