Blockchain can modernize the system of mutual settlements and radically change the work with external regulators. The uniqueness of the technology lies in the immutable and irreversible nature of data in a chain created on a cryptographic algorithm.
The main characteristic of any transaction is determinism. This operation can either be performed or rejected, regardless of how many stages the process of its implementation is divided into. A blockchain cryptocurrency transaction is a symbiosis of a bank transfer and the changes made to the information block.
Since Bitcoin is the most popular cryptocurrency in most countries of the world, the transaction of this particular asset will be the subject of our review. How does a Bitcoin transaction work? How to buy BTC on blockchain? Why is my BTC transaction unconfirmed? Get the answers in this new Changelly article.
What is BTC Transaction
A transaction is a signed element of the information module necessary for transferring assets between network participants. After the verification is completed, bitcoin miners add txid transactions to the database of the new crypto block.
The Bitcoin network is built on the modern version of a digitized ledger called a distributed ledger. The distributed registry system is a vast number of copies of the database. Any change in the structure of information will be reliable only after the transaction is confirmed by the network nodes. A record of the performance of a particular operation is entered into each of the copies of the database.
Protective mechanisms are built into the project’s blockchain program code to preserve the integrity of the data structure. It is impossible to cancel and delete information from the log of the completed bitcoin transaction.
In addition to standard transactions, which are the direct equivalent of bank transfers, there are also generating ones, during which a certain number of created coins is sent to the crypto miner as a reward for the block found.
They differ only in that the sender of the standard Bitcoin transaction can be any owner of digital coins, and the system executes the generators in automatic mode after a new block passes the test.
Bitcoin Transaction Life Cycle
BTC Transaction Formation
To complete the transfer, the cryptocurrency holder who owns the private key to access the program fills out the sending form in the electronic crypto wallet. It is necessary to indicate the address of the recipient and the amount of funds sent.
When the sender confirms the intention to send the money, the transfer information falls into a special meme pool, where it will wait for its turn to be processed by the miners.
Each of the Bitcoin transactions is sent to all nodes that combine them into a new block. When one of the miners finds a hash code, the block is sent for verification. In a Bitcoin network, a transaction is considered completed after six subsequent blocks are found confirming its validation.
BTC Transaction Example
We will tell you more about the blockchain transaction mechanism. The digital signature of operations in the blockchain system is based on cryptography and has two keys. The first key is private, available only to the owner of the assets, and is kept confidential and is never transferred to other people.
However, on the deposits of trading floors and in some centralized systems for storing electronic assets, private keys or their duplicates are stored by the administration of the service.
The second key is public. It is needed to conduct, verify and track the Bitcoin transaction. It is impossible to calculate the secret key using the public one, but it is not very difficult in the reversed order.
On the Bitcoin network, the ECDSA elliptical cryptography standard is used in conjunction with the secp256k1 elliptic curve. The private key is 32 bytes, the public key is 33 bytes, and the signature is approximately 70 bytes.
Let us explain in simple words the idea of signatures with a public key. Alice sends Bob 1 BTC. She forms a transaction, which indicates where to get the money and to whom to send it to, and confirms her right to dispose of this fragment of the blockchain with a private key. Miners confirm the validity of a financial transaction based on a public key.
Peer-to-peer networks do not provide a central node that controls the operation of the system, which eliminates financial fraud.
How to Track My Bitcoin Transaction
So, the money was sent and left the wallet, but it will take some time until it reaches the recipient. What if something happens to the coins – how to check the Bitcoin transaction? For this, Block Explorer was created.
Verification of Bitcoin transactions is available in the section ‘Search and confirmation of transactions’.
- Open the main page of the site;
- Choose the column ‘Data’;
- In the pop-up menu, open ‘Explorer’;
- To simplify the search, click the ‘All Blockchain’ button and select the ‘Bitcoin service’;
- Enter the transaction txid in the address bar and click “Search”.
TXID is a transaction identification number that allows you to track it in the blockchain system. Do not confuse transaction id with wallet address. TXID is a unique passport that the system assigns to a particular digital asset transfer. The only purpose of TXID is to help any user to detect a transaction and track its status in the crypto network.
At the wallet address, it is quite possible to track the transaction of bitcoin. It will be displayed along with other data in the history of transfers ever sent or received by the owner of the wallet.
Why is My BTC Transaction Unconfirmed?
The size of one block in the Bitcoin network is small, only 1 MB, which protects the system from DOS attacks. With the growth of its popularity, cryptocurrencies have started having problems with scalability. It became increasingly difficult for miners to cope with the processing of a significantly increased number of transfers.
It is impossible to accurately answer the question: ‘How long does it take to confirm a Bitcoin transaction?’. During the cryptocurrency fever, the load on the Bitcoin network was such that the number of unconfirmed transactions reached a critical level. Sometimes it took a week to wait for a transfer from one address to another. However, in 2020, checking a Bitcoin transaction takes no more than an hour and a half.
Network nodes can reject an unconfirmed BTC transaction, and in this case, the coins will be returned to the sender address. The main reason for freezing and returning BTC transfers is a low commission.
Bitcoin clients enable users to set the size of commission payments independently, but the processing fee must be adequate. Otherwise, the transaction will not take place. Although if the number of unconfirmed transactions is minimal, you can transfer with a low commission safely.
How to Speed Up Bitcoin Transaction?
There are three ways to independently solve the bitcoin unconfirmed transaction problem, but note that none of them guarantee a 100% result.
Increase the commission fee (Replace-by-fee). Previously, transactions in the Bitcoin network were carried out with a fixed commission. With the growing popularity of digital gold, the number of online payment transactions has increased.
Then there were utilities with the option of dynamically changing the size of the commission fee, which allows you to speed up unconfirmed blockchain transactions. We are not talking about a real change in the money already sent. By activating the RBF option, you tell the network that you are ready to pay more in case of a delay, and the new transfer is automatically accepted instead of the old one. This feature has Bitcoin-wallets like Bitcoin Core, Electrum and Green Address.
The second method is called Double Waste. No, this is not at all a malicious attack, which will require at least 51% of the total power of the Bitcoin network. When you resubmit the transaction with a higher commission, the old one is cancelled. You should not abuse this method.
The last is Child Pays For Parent (CPFP). It means selecting transactions for mining not just based on their fees but also based on the fees of their ancestors (parents) and descendants (children). Both the sender and the recipient can use CPFP if he has money in his wallet. It is necessary to form another transfer, using the output of a stuck transaction. Note that the balance of funds should be enough to pay the commission for two transactions.
A more accurate explanation of how CPFP works is with a fiat money example. When you buy a product, you must “send” cash to the seller. He also uses this money to purchase other goods while making that “transfer”.
The seller’s transaction will be considered the child of your parental transaction because he will not be able to buy anything until you pay him. If you pay higher than the cost of the goods you buy, the seller must return the difference to you. Each Bitcoin transaction has the same exit for change, allowing you to start the CPFP mechanism.
Accelerating transactions in the Bitcoin network and other cryptocurrencies is one of the priority tasks for the creators of blockchain projects. One option is the Lightning Network, which is used as a blockchain add-on to achieve higher throughput.
There are other exciting developments. Cryptocurrency is the money of the future, and now we live in a period of development of a new type of a world financial system, where even banks using blockchain.
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