Bitcoin transaction can actually be quite complicated to understand. It is very rare that an incredibly large amount of Bitcoins will be sent instantly; instead, the network and your Bitcoin wallet has to go through multiple steps to get this done. The Bitcoin is essentially a file that has a certain value and that is registered as transaction when you get a receipt or initiate a payment. So, in any Bitcoin transaction, there will be three key elements; transaction input, transaction output, and the amount of Bitcoins. The first refers to the address from where the funds are being transferred; the second refers to the Bitcoin address where the money has been sent while the amount refers to the amount of Bitcoins transacted.
How do Bitcoin transactions work?
When you send Bitcoins to a person, you may be sending the coins that you have received from someone else. That address from which you received your Bitcoins is a registered address on the blockchain, and is called the input. Your address is then the transaction output. When you send coins to someone, the wallet will make a transaction output to another registered recipient address. Your address now becomes the transaction input. So, using the system, it is possible to trace Bitcoin transactions right to when the first coin had been created. The system is therefore completely transparent and records of transactions are viewable by all.
For receiving or sending Bitcoins you must download a digital wallet. The process of transfer may vary from one wallet to another. On the whole, it is almost the same as using any money-transferring app. You have to choose the currency type that you wish to send; in this situation it will be BTC or Bitcoins, type in the address of the recipient, type in the amount, pay transaction fees, and then click on the “send” option.
Bitcoins do not exist physically like cash; you will not find Bitcoins inside any hard drive or spreadsheet. Transactions are updated and verified by the Bitcoin network and shared across all computers in the network. You must have both public and private keys for sending BTC. The public key refers to an amount that had been previously sent while the private key refers to a series of letters and numbers that work like passwords and gives you exclusive access to your wallet. Public keys can be shared securely with others because these are Bitcoin addresses that will work like email IDs. You must give this data to others so that they can send you Bitcoins. But the private key must be kept hidden. You should never share it with anyone unless you have absolute trust in this person. It is also advisable to back up this private key in case they are misplaced or stolen. The backup must be stored in a safe location.
All Bitcoin transactions are not confirmed quickly. They have to be first confirmed by the miners on the Bitcoin blockchain. Miners will mine blocks that contain records of transactions between parties. At times, transactions can be excluded from a block and put on hold till the next one. Moreover, block sizes are also limited and this can slow down confirmation times.