In this article we have discussed what technology and how does this technology works while sending and receiving cryptocurrency and where exactly records of our cryptocurrency transactions placed. Are you in hurry then you don’t need to go through full article let me tell you simply Blockchain Technology is used to record most of the cryptocurrency transaction. Why I am saying most is, Chances are there that we may find a better way than blockchain too. But if you have enough time then read how does our transaction completed when we send or receive crypto from one another. Do you know blockchain is most secured protocol and hence it is used to record cryptocurrency transactions.
Hello guys and girls I’m Vikram from target cryptocurrency and welcome to this blog every few weeks we’re going to upload a cool new article. just like this one explaining some basic concepts around Bitcoin this way you can learn about Bitcoin yourself or forward these article to friends or family members who have questions today’s topic is the path of Bitcoin from cent to receive. In this article we’re going to go over exactly what happens to a single Bitcoin from the moment you hit the send button in your wallet until it’s received on the other end. We will also learn why blockchain is best technology to record most of the cryptocurrency transactions and is any alternative of it and what is the future of blockchain technology. hopefully once we finish this lesson you’ll have a good understanding of how the Bitcoin network works and what’s the role of each specific player in the Bitcoin ecosystem.
what technology is used to record cryptocurrency transactions
Blockchain technology is used to record most of the cryptocurrencies transaction. There are several reasons to use blockchain as recording crypto transaction. Now what is blockchain and it is very deep concept but I will tell you a short info about blockchain technology. Consider it as database which is connected to all data and here data is transactions. By the name blockchain defines chain of blocks and here blocks are the data or details of each transaction. further below you will understand full process of sending and receiving crypto. Most of the reasons to use blockchain technology to record cryptocurrency transactions is discussed below.
Reason to use Blockchain Technology
- Easy way to process the transaction
- Decentralized means deal without middle man
- Secured because of cryptography (It’s a kind of encryption)
- Publicly access of transaction details without your name and identity
- Saves us for counterfeiting (falsification)
- No transaction or transfer limit
- No manipulation occurs
Future of Blockchain Technology
It has a great future because there are many features of using blockchain. It can also be used as voting machine which is highly secured and publicly accessed by any person. Many organizations are already adopting blockchain as their technology for work. There are many more live examples where we can use blockchain for better future. and till now there is no alternative way to record our transactions decentralized and secured. In future might there will be a new technology to do so but blockchain will never die.
Process of Sending and Receiving Cryptocurrency
let’s get started the path from cent to receive has three parts signing, broadcasting and confirming so let’s start with the first part.
when I hit the send button in my wallet what I’m actually doing is telling my wallet hey wallet I want to send one Bitcoin to my friend Steve here is Steve’s Bitcoin address the wallet in response creates a transaction message containing information about me. the sender Steve the recipient and the amount being sent in this case one Bitcoin afterward the wallet produces a unique digital signature for this message by mathematically mixing it with my private key. it’s basically a long string of letters and numbers that act as the password for your bitcoins whoever knows my private key has control of my bitcoins.
a digital signature is a way to prove that I own the private key to my bitcoins by using only my public key which I have no issue exposing thus keeping my private key well private also digital signatures are different. each time you sign a transaction well that’s why they’re even more secure than a real signature since they’re unique for each and every transaction so if I send Steve one Bitcoin today and then another Bitcoin tomorrow. each of these transactions will have a different digital signature after signing the transaction message the wallet then groups the signature along with my transaction message into a small file and this concludes our first step of signing and now we can move on to the next step.
in the broadcasting step the wallet starts sending out the file to other computers that hold a copy of the blockchain. these computers are also known as nodes each node that receives the file verifies that it’s legit it’s basically looking to see that I actually have the funds that I want to spend and that my signature checks out much like a banker would check your account balance before clearing your cheque once my file is verified. it’s then passed on to other nodes in the network that repeat this process when a node receives a file it keeps it in a holding area called the mempool the mempool.
short for memory pool is a space dedicated for valid but still unconfirmed transactions once the transaction message finds its way to the mempool of the different online nodes on the network we can say that the second step of broadcasting is officially finished. now I want to take a quick pause and talk about the status of our transaction at this point in order to actually see what’s going on with our transaction while it’s making its path along the Bitcoin network we can use a block Explorer.
a block Explorer is a tool usually in the form of a website that allows you to search and to navigate through the blockchain using a block Explorer you can check the balance of different Bitcoin addresses. track transactions and get a wide variety of statistics about the network so at this point if we look at our transaction through the block Explorer we will see that it is marked as unconfirmed meaning that it was broadcasted to the network and had its digital signature verified but it still isn’t part of the blockchain.
this type of transaction is also referred to sometimes as a zero confirmation transaction an unconfirmed transactions should be treated as its name implies unconfirmed. this means that the transaction can still get cancelled and there’s no guarantee it will ever enter the blockchain if your business sells or ships goods and you accept payment in Bitcoin you should never accept an unconfirmed a transaction as proof of payment now we can move on the final step.
confirming our transaction is that miners group transactions together meaning they take those files sitting around in the mempool group them together and create a block of transactions. there is a limit to how many transactions can be inserted into each block therefore miners will usually pick the transactions that have the highest mining fees attached to them. first miners will then compete with each other in order to get their block into the blockchain the mining competition is based on mathematical calculations and the miner with the most computational power will have the best chance of winning. once a miner wins the competition and gets his block into the blockchain all of the transactions that were in that block will be considered as confirmed basically the miners are writing the history book of Bitcoin transactions and whoever wins the competition gets to write the next page on average a new block of transactions will be mined or inserted into the blockchain every 10 minutes.
now keep in mind that this is on average sometimes you’ll get two blocks confirmed within one minute and sometimes it can take more than an hour. if a block was mined with your transaction in it you’ll notice it will now show on the Block explorer as having one confirmation as more and more blocks are added afterward the confirmation number will grow. think of it as a building of blocks with our block at the very bottom every additional block said on top of our own block makes it harder to remove. that’s why it’s usually suggested to wait for at least six blocks before considering a transaction as fully confirmed without any chance of cancellation well that’s it our transaction is now fully confirmed and received. hopefully you now have a better understanding of how the Bitcoin network operates if you have any additional questions about what we just covered feel free to leave them in the comment section below.
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