Nowadays, everyone is interested in investing in Bitcoin. With many countries regulating Bitcoin and other cryptocurrencies, the level of trust among investors has increased. However, few people know how Bitcoin transactions work.
How Do Bitcoin Transactions Work?
When you transfer Bitcoins from one Bitcoin address to another, it gets recorded on the blockchain and acts as a Bitcoin Transaction. There is a certain procedure that takes place while these transactions are done. Let us understand how Bitcoin transactions occur.
- You need to have a Bitcoin wallet for a transaction to work.
- It is also necessary for the receiver to have a wallet.
- Your Bitcoin addresses are stored on these wallets.
- One can create as many addresses on a wallet as they want.
- You need to create a new address to receive Bitcoins. This new address is created by Bitcoin client software
- In this new address, a cryptographic key pair is generated consisting of a private key and a public key.
- The private key gets stored in the sender’s wallet and the public key helps verifying that the signed message using the private key is valid.
- The sender can then transfer Bitcoins with the help of a Bitcoin client.
- The public key will be used to receive Bitcoins and the private key will be used for signing transactions and spending Bitcoins.
- With this digital signature and the public key, the Bitcoin network will be able to verify that the Bitcoins have been spent by the owner only.
- A mining node will then verify the transaction and then will include it in the block transaction, which will be recorded on the blockchain.
- Here the Bitcoin transaction becomes a part of the open distributed ledger.
- The Bitcoin network will then accept this transaction as valid.
- Once the Bitcoin is received by the receiver, that can be spent again using the same transaction process.
The above may seem a long process for many. Let us see how long it really takes?
How Long Do Bitcoin Transactions Take?
Let’s begin by understanding that Bitcoin transactions take different amounts of time. It is certain that transactions aren’t instant. They do take time. And some Bitcoin transactions might take longer than usual.
So, how long does a Bitcoin transaction take? On an average, 10 minutes to 60 minutes is what is expected to take for a Bitcoin transaction to complete.
The Bitcoin mining process does affect the transaction time. Bitcoin miners generally mine those blocks first, through which they can earn high fees. The transaction process will also slow down when the Bitcoin network has more transactions on a daily basis.
To speed up your Bitcoin transactions, you can opt for the lightning network, which is a separate channel for payments. It follows different rules, which help in speeding up the Bitcoin transaction time.
In this article, we have tried providing a simple answer to the very complex Bitcoin transaction procedure. So next time you think of doing a Bitcoin transaction, you will understand how it actually took place.
