Now with advanced technology and acceptance by many firms, bitcoins are becoming the emerging and top Cryptocurrency in the business world. It is not an easy task to create and mine bitcoins. Because, for ensuring security, a strict verification process utilizing mining is followed by using SHA256 hashing system. The Bitcoins are generally stored in a digital wallet, which is usually software or a file stored in the desktop, mobile, web, or cloud. The process of selling and buying of bitcoins by the exchange of goods takes place through this digital wallet.
So, you may be how does a bitcoin functions transaction? This question will be answered in the following sections of the article, along with other features related to a bitcoin transaction.
How bitcoin function?
Like the traditional banking system, every bitcoins will have a bitcoin account. Every bitcoin account will be provided with a public key and a private key. The public key can be available to anyone in the transaction chain. The private keys are like bitcoin addresses. If someone knows your public key, they will be able to transact bitcoin to your account. To spend the bitcoins, the account owner has to use his/her private key as an authentication process. As the bitcoins are distributed, every user in the network will know about the transaction. A transaction will be confirmed only after the miners, validates the transaction. The total length of the private key is 256-bit, and 1077possible private key combination is possible.
Sending bitcoins
For sending bitcoins, for the exchange of goods or services, the sender must first know the bitcoin address of the receiver. The following are the steps to send the bitcoins., which as depicted as Bitcoin they are:
- Open your Bitcoin wallet and before that copy the address of the receiver.
- Now a screen will appear with various tabs. Click on send coins and after that enter the receiver’s address in the ‘Pay to’ field.
- The sender can create a label so that they will be able to find them in the address book for sending to a group or the same person several times.
- After this process, enter the number of Bitcoins, in the amount field and then click the send button.
Transaction confirmation
After the sending process, a transaction is initiated, which will be stored in the block. In about 10 minutes, a new block will be created for every transaction. For the massive transaction, there will be around six confirmations for the transaction. But for the small transaction and with a trusted receiver, a confirmation is not required.
Other features of bitcoins
Bitcoin anonymity
From the user’s perspective, a bitcoin transaction is very simple, like an app or website, where the users buy/sell bitcoins in exchange for goods and services. But in order o offer security, at the backend, many security measures will be followed. Every user transaction will store in a large public ledger called a blockchain. It is there where the miners perform the validation of the transaction. Every transaction in blockchain technology is visible to everyone connected to the network.
The anonymity level can be customized based on the requirement. A bitcoin transaction from one address to another in public, and hence the transaction analysis through the address or public records are made. This analysis is called traffic analysis.
Everyone knows about the transaction and how much bitcoins are available with every user connected to the bitcoin network. But the user’s identity like name, address, personal information, and lots more can be obtained by the malicious users, as every block has an encrypted hash code, which is developed based on the hash code of the previous blocks.
So, any change in the transaction will be notified to all the users in the network. If any malicious user tries to tamper the transaction, the hash code becomes more complex, leading to unsuccessful attempts.
The Bitcoins can be made compatible, only when the users agree to follow the same rules for the software they use. The bitcoins can function properly only if there is an agreement between the users and developers, on the usage of the bitcoin software.
So, this article has answered all the questions related to the working of Bitcoins in a detailed manner.