Bitcoin Transactions 101: Hereâ€™s how Bitcoin Transactions Work
Bitcoins are all rage these days when it comes to online trading. All around you hear about bitcoin exchange, buying and selling bitcoins, using bitcoins to buy goods and a lot more. So given that this is not paper money or plastic money, it can be a little tricky to understand how it works. In this post, we are going to show you how a bitcoin transaction works and the similarities and differences it has with paper and plastic money. So here goesâ€¦
They donâ€™t exist
Unlike paper money and plastic money, no physical evidence or even a digital file shows a bitcoin. You can go to a trading platform like bitwallet and check out a specific bitcoin address or even look at your bitwallet bitcoin wallet but you will not see any digital bitcoins held therein.
What you will find instead is a record of transactions showing balances from various transactions. There is a public ledger called a block chain that has records of all these transactions.
So how does the transaction appear?
For instance on bitwallet, the transaction has three pieces of information that show a bitwallet bitcoin exchange between two individuals. You will see the input, which is a record of the address used to send bitcoins to the buyerâ€™s bitwallet bitcoin wallet, then the amount of bitcoins that the buyer is sending to the individual that is trying to sell bitcoins on bitwallet, and finally the output, which is the sellerâ€™s bitcoin address.
When you want to conduct a bitwallet bitcoin exchange you will need to have two things:
A bitcoin address
A private key to access your bitwallet bitcoin wallet
You can get both by simply registering at online bitcoin trading platforms like bitwallet. Most of these platforms will even give you a free bitcoin wallet and all of them will keep your private key secret.
Once you have these, you can trade online on these platforms and transfer bitcoins to and from your bitcoin wallet through these secure platforms using the bitcoin address.
These are not always there but may be required in some cases. They are set based on various factors that differ with each trading platform. Some bitcoin wallets even allow you to set your own transaction fees.
A fee is any portion of a transaction not picked up by the recipient of the bitcoins or not returned as change to the seller. This bitcoins will then be available to the miner who can solve the transaction block and get the bitcoin.
Are there any receipts?
Take for instance that you are trading on bitwallet. So you go to bitwallet â€“ buy bitcoins, then you access you bitwallet bitcoin wallet to conduct a bitwallet bitcoin exchange with another individual. You would expect to have some kind of proof of transaction like a receipt right?
Well, creation of bitcoins did not really have receipts in mind. However, changes are on the way to change this and we may soon be seeing more user-friendly transaction on the various bitcoin platforms.
As you can see, there are some similarities and some differences between bitcoin and other kinds of currency. However, both are legitimate and it will only be a matter of time before bitcoins are more widely accepted.