Transferring Bitcoin may seem very confusing at first. You need to consider things like public keys, private keys, different wallet types, wallet addresses, and transaction fees. But in fact, it is a rather straightforward process. After all, cryptocurrencies were designed to be transferred efficiently in the first place. As you’ll see, transferring BTC is as easy as sending money via PayPal, although with slightly different steps.
When sending Bitcoin between wallets, the first thing to consider is the wallet service you are using. Every crypto wallet has a different user interface. For example, sending Bitcoin (BTC) from a paper wallet is very different from using a mobile wallet. For this reason, the steps may differ slightly based on the wallet you choose.
In this article, we will talk about how Bitcoin transactions work and give you a step-by-step tutorial on how to make a Bitcoin transaction using several popular wallet services.
How Do Bitcoin Transactions Work?
The blockchain nodes compete to solve a cryptographic hash function, and the one that succeeds gets to validate the block and the incoming Bitcoin transaction. Adding these signatures to the end of the coin enables the receiver to verify their ownership.
There are different consensus mechanisms that different cryptocurrencies use. For example, Bitcoin uses Proof of Work (PoW) while Ethereum has switched to Proof of Stake (PoS) (Ethereum 2.0).
In Bitcoin’s PoW algorithm, the transactions are verified through a cryptographic puzzle that’s to be solved among nodes (or miners). You can think of this puzzle as one that’s impractical to try and solve logically. For this reason, nodes continuously generate a hash output from some random input to find a valid hash. Because the process is virtually random, nodes with more computing power can generate more hashes per second, thus having a higher chance of hitting a solution.
Every transaction ever made is written in the Bitcoin blockchain is being continuously checked among the nodes (miners) in the network. This way, we have a decentralised, secure peer-to-peer payment system that allows for irreversible transactions.
Each wallet in the blockchain comes with a public and a private key. These keys come in pairs and are created using sophisticated cryptographic tools. You can think of them as a bank account address and a secret PIN or a signature that proves your identity on the Bitcoin blockchain. The public key lets you send and receive cryptocurrency between wallets, while the private key lets you prove ownership over the coins. The most important takeaway is that you should always keep your private key to yourself to prevent any sort of scam or theft.
How to Send Bitcoin From One Bitcoin Wallet to Another?
When you purchase Bitcoin, you can either store your coins in wallet services designed solely for keeping your cryptocurrencies safe or keep them in the wallet provided by the exchange platform where you purchased your BTC in the first place. Some traders consider the second method less safe, while others like the convenience of being able to easily swap their assets between the exchange wallet and the exchange account for day-to-day trading.
Sometimes, you might decide you want to shift your assets between wallets or deposit or withdraw your coins from your exchange account to an external wallet. Or maybe you want to transfer Bitcoin to someone else’s Bitcoin wallet or make a regular Bitcoin payment. To do that, you need to have:
- A Bitcoin wallet;
- Some Bitcoin deposited in the said wallet;
- The recipient’s Bitcoin address to send them some BTC.
It’s as simple as that.
How to Deposit and Withdraw Bitcoin On Coinbase
The processes of sending and receiving Bitcoin on a cryptocurrency exchange are called depositing and withdrawing respectively. To do that, you need to open an account on an exchange platform of your choice.
We will use one of the most popular exchanges on the market, Coinbase to show you how to deposit funds to your account. These steps are quite similar across other major platforms, such as Binance, Gemini, or Kraken.
Another reason why we choose Coinbase is that it provides a non-custodial wallet service that you can link to your Coinbase account and easily send your funds back and forth. The Coinbase Wallet lets you store all your cryptocurrencies and tokens including NFTs in one place and works as a gateway to the world of decentralised finance (DeFi). This means that you can also transfer your assets to a decentralized exchange (DEX) of your choice, such as Uniswap or 1inch.
When using Coinbase Wallet, linking it to your Coinbase account is a good idea in terms of practicality. To link your Coinbase Wallet to your Coinbase account, click on the Open Coinbase Wallet button on your Coinbase dashboard. Once you do that, you will be prompted to download the Coinbase Wallet app. You can do this from the App Store for iOS or Google Play for your Android devices. Coinbase Wallet doesn’t have a desktop app but it does have a browser extension for Chrome. If you already have the app or the extension on your device, the asset page will open automatically. From there, go to your settings and tap Connect to Coinbase. Follow the instructions on your app screen to complete the procedure.
How to Transfer BTC From Coinbase Wallet to Your Coinbase Account
If you want to trade your assets on the market or make a fiat withdrawal, you need to transfer them from your Coinbase Wallet to your Coinbase account. To do that you need to open the Settings tab in your Coinbase Wallet app and select Buy or Transfer. Select Bitcoin, enter the amount you would like to send to your account, and tap Continue. You will receive a 2-factor verification code to complete your transaction.
How to Transfer BTC From Your Coinbase Account to Coinbase Wallet
To send Bitcoin or any other cryptocurrency from your Coinbase account to Coinbase Wallet, open your Coinbase wallet app, open Settings, and tap on Buy or Transfer. Select Bitcoin. Enter the amount you would like to send and tap on Continue, and follow the steps to complete your transfer. Keep in mind that you can only transfer assets available on Coinbase. Your funds that are on hold are not transferable.
How to Transfer BTC From Your Coinbase Account to Another Wallet
To send your BTC to another wallet, you only need to know the recipient’s wallet address. Because it’s very easy to get a wallet address wrong (as they are long strings of characters with letters and digits), you can use the QR codes that you can scan on your mobile wallet app for convenience. To do that, ask the recipient to send you a screenshot of their wallet address’s QR code.
Once you have the recipient’s address, open your Coinbase account and go to your spot wallet. Enter the wallet address and the amount of Bitcoin you want to send, and as easy as that, you are done.
Sending and Receiving Bitcoin on a Hardware Wallet
A hardware wallet is the best place to keep your crypto holdings as there are many risks associated with online wallets and exchanges. When you use a custodial online wallet, you basically hand over the ownership of your funds to the company, which keeps the assets on online servers susceptible to hacks.
Hardware wallets also guard the ownership of your assets but do that offline, which makes them less prone to malware, attacks or hacks. There are many hardware wallet companies that produce secure products. One of them is Trezor and its high-security device for storing cryptocurrencies. We are going to explain how to send and receive Bitcoin on Trezor, but the steps are similar if you’re using another hardware wallet like Ledger.
If you want to transfer Bitcoin from Coinbase to your hardware wallet, you need to connect your Trezor device to your computer and head to your account. Enter the necessary information to log in and select the cryptocurrency account you want to transfer, in this case, Bitcoin (BTC).
If you want to receive Bitcoin in your Trezor wallet, select Show Full Address under the Receive tab. Select Bitcoin under the supported coins and double-check your address. You can also open the QR code if you have the Coinbase app on your phone to scan it. Next, in the Accounts tab, choose the account you want to send coins from, and input the Trezor address.
If you want to transfer bitcoins from your Trezor wallet, connect your device to your computer first. Open Trezor’s official client on your computer or go to your account and click the Send tab. You’ll be asked to enter the recipient’s address, which you can find in your Coinbase account. Copy the address and head back to Trezor. Paste it into the relevant field and enter the amount of Bitcoin you want to send.
Common Pitfalls When Sending Bitcoin
Sending the Wrong Currency
Every single cryptocurrency you choose to transfer between wallets has its own address, so you should make sure you’re sending your Bitcoin to a Bitcoin address, your Bitcoin Cash (BCH) to a Bitcoin Cash address, or your Ethereum (ETH) to an Ethereum address if you don’t want to end up losing your assets. If you have sent BTC to the wrong currency address, you should contact your account’s support team to see if they can help.
Lack of Patience
Keep in mind that it may take up to several minutes for your transaction to appear in the recipient’s wallet once the Bitcoin network verifies it. This depends on the current network congestion, so it’s best to wait for a couple of minutes before you resend your transaction.
Sending the Wrong Amount of Cryptocurrency
Cryptocurrency transactions are typically irreversible, meaning that if you send more coins than you intended to, you might not be able to get them back. Therefore, always double-check everything before hitting that Confirm button.
Entering the Wrong Address
Again, because cryptocurrency transactions are irreversible, you might lose your funds if you don’t enter the correct address. If you want to enter the string address, it’s best to copy and paste it. While doing so, don’t mix up the public key with the private key. It might be a good idea to scan the QR code of the wallet address on your phone.
A Few Words Before You Go…
Transferring Bitcoin between wallets is a very easy process. Even though the number of services out there might be confusing at first, all you need to do is provide your Bitcoin wallet with the wallet address of the recipient’s wallet. The exact steps and fees might change depending on the service you choose, but the process is very simple. Get the recipient address, place your transaction through your wallet service, and wait. As long as you provide the correct address, there is nothing to worry about.