Bitcoin transactions are a crucial part of the BTC ecosystem since the main perk of Bitcoin as digital cash is the ability to quickly and safely transfer funds worldwide using its highly advanced blockchain network.
The daily trading volumes and market capitalization of BTC is numbered in hundreds of millions of USD, making it one of the most traded financial assets. The difference between BTC and other highly traded assets is that bitcoins don’t physically exist but they carry enormous value with each coin. Bitcoin went a long way from being worth almost nothing when it was launched in 2009 after the publication of the BTC whitepaper to being worth several tens of thousands of dollars a decade later.
Knowing how BTC transactions work and how to check the status of your transfer is of high importance if you are dealing with Bitcoin on a daily level.
How the Bitcoin Blockchain Works
The BTC blockchain is the first cryptocurrency network and the first blockchain in the world. It revolutionized the way funds can be exchanged between parties really fast, using a reliable network that doesn’t require any additional paperwork or approval by banks or government institutions.
The BTC blockchain works as a decentralized, distributed public ledger of all transactions ever and can publicly be accessed to check the status of a transaction. The network has the form of a chain of blocks, where each block has 1MB of transaction data. In order for a transfer to get verified and sent to the receiving Bitcoin address, it needs to be approved by several system nodes that are actually miners and their mining rigs.
Security is one of the biggest issues when it comes to transferring money and this is where blockchain technology excels. Every transaction goes through the proof-of-work algorithm, which is the system for validating transfers on the blockchain. No transfer can be confirmed just by one system node, which makes it very safe to send funds using the blockchain.
A special consensus algorithm is also part of the blockchain security system and it requires a special SHA-256 cryptographic transaction hash to confirm a transfer. This hash acts as the proof of work for all system nodes that a transfer is indeed legitimate. Hackers still haven’t been able to get around the BTC blockchain security and this is why other altcoins like Ethereum (ETH), Bitcoin Cash (BCH), and others tend to copy the key aspects of Bitcoin’s network.
BTC transactions are one of the most important activities for every Bitcoin owner, no matter if they are an experienced crypto broker, crypto enthusiast, or just a beginner in the world of cryptocurrencies. These are some of the key aspects of BTC transactions that can help you understand the dynamics behind a transaction.
Every Bitcoin transfer needs to have a set transaction fee. When you send some BTC to another party, you have to include a transaction fee that acts as a token of appreciation for the miners that will process and verify your transfer.
The amount of satoshis you will include as a transaction fee is entirely up to you, but it is highly recommended to select at least an average fee to be sure that your funds will be processed in a timely manner. The higher the fee, the more probable it is that a miner will select and verify your transaction. If the fee is too low, then your transaction may take quite a bit to get verified or it may even stay unverified for a long time because miners will rather select transfers with average and high fees.
A lot of Bitcoin wallets and exchange platforms have built-in BTC fee estimators but in case the ones you are using don’t have one, you could just use Bitcoinfees.net and quickly find out how many satoshis you should include as a miner fee.
The average BTC transaction time is anywhere between 5 and 10 minutes. This is the usual time it takes for a transfer to get processed through the blockchain and verified by multiple miners.
However, sometimes this process can take longer. One reason for a longer confirmation time is if you include a lower-than-average transaction fee and miners simply choose transfers with higher fees to confirm them instead of yours.
Another common reason is network business in times of high BTC price volatility. When the price of Bitcoin has sudden highly volatile periods, large sell-offs and/or purchases of Bitcoins are a common practice. During these periods, enormous amounts of transactions are carried out simultaneously by crypto brokers and it can take considerably longer for your transfer to get verified.
A transaction ID (TXid) is the identifier of each transaction and it can be used to track your transaction through the verification process using a Bitcoin blockchain explorer website such as Blockchain.com. Using a block explorer, you can easily track your transaction with the TXid and check if it is verified.
A Few Words Before You Go…
These were some of the basics necessary to understand how BTC transactions work. It’s no tragedy if your transfer is getting a bit delayed. You shouldn’t assume right away that something deeply wrong is happening with your transfer and this is why you should use a block explorer to check if your transfer is verified.