Bitcoin transactions are performed using bitcoin wallets. These transactions are digitally signed to maintain security. Everyone involved in the network knows about a transaction which is about to happen and any previous record can be checked anytime through public ledger.
Bitcoins don’t exist physically but they exist digitally and also you can get records of Bitcoin transactions but cannot touch it as it is intangible. There exist only records of transactions between different addresses, with balance amounts that keep on increasing and decreasing.
Now, the point comes that how a Bitcoin transaction works:
If one person has to send Bitcoins to another person, then the corresponding transaction will be combined with three pieces of data:
Input: This is basically a record of the bitcoin address being used to send the bitcoins.
Amount: This represents the amount of bitcoins that are being sent.
Output: It is a record of bitcoin address at which bitcoins are being sent.
How to send it?
Two things are required to send bitcoins; a bitcoin address and a private key. A bitcoin address is produced randomly and is actually a series of letters and numbers. The private key is another series of letters and numbers. The only difference in between both is that private key is kept secret.
The sender of Bitcoins uses his/her private key to sign a message with an input, amount and an output. Then, the sender sends bitcoins from his/her bitcoin wallet. After this, bitcoin miners come in the frame and they authenticate the transaction by putting it into a transaction block and then start solving the associated mathematical puzzle.
Wait a bit to let your transactions be clear
It takes some time for the transactions to get clear because each transaction is to be verified by the miners who solve a mathematical puzzle to let an operation succeed. According to bitcoin protocol, each block takes approx. 10 minutes to get mined. So one has to wait until the mining gets finished.
This time taken in between the process depends upon the merchants. Some make you wait till the mining gets done and others wouldn’t make you wait because they take an assumption that you won’t make an attempt to spend the same bitcoins in a different transaction.
- Input and output amounts need to be matched to perform a successful transaction.
- The negligible fee is being associated with bitcoin transaction. Transaction fees are calculated using many factors. Any part of a transaction that isn’t chosen by the receiver then it is considered as a fee. Then, it is being rewarded to the miner who solves the associated puzzle with transaction block.
- No taxes are associated with bitcoin transaction because of zero involvement of government bodies.