To understand how does a crypto transaction work, we have to talk about cryptography. Cryptography is just a fancy word for encrypting and decrypting information. In the case of cryptocurrency, cryptography is used to make sure your money is secure and safe. How does this work? Let’s take a look at an example:
Let’s say that you want to send me some money. You open up your wallet app, enter my address (which is actually just a long string of characters), and type in the amount that you want to send me. You press “send”, and voila! I now have some money. But how did it end up in my wallet? Here’s what happens:
A transaction is created, which specifies the details of your transaction (sender, receiver, amount). The transaction is then broadcasted to all the computers in the network (the nodes). Each node validates the transaction by checking that you have enough funds to send me that money and that nobody else has spent those same funds already. Because there are so many nodes on the network, it becomes really difficult for someone to tamper with all of them at once and change their records of your transactions (this process is known as consensus).
How does cryptocurrency transactions work?
A cryptocurrency transaction is the transfer of a certain amount of cryptocurrency from one address to another. The most popular cryptocurrency is Bitcoin, which is why Bitcoin transactions will be used for the purposes of this article.
Every transaction on the blockchain can be viewed by anyone who has access to it. Due to the fact that all transactions are public, you can use various services that allow you to track your transactions and check your balance.
The sender sends a transaction by signing their public key with their private key. The public key is the address to which the coins were sent, and the private key is a secret code that only the owner knows. Signing a transaction proves that it was sent by the owner of this wallet. Signing also provides protection from fraud: if someone tries to modify your transaction without having a private key, they will not be able to sign it again, as they do not have access to your private key.
The process of cryptocurrency transactions.
The full process of cryptocurrency transactions. Here we will know The process of cryptocurrency transactions. There are many ways to store and use cryptocurrency, but the process is basically the same no matter what method you choose. It can be a little complicated, so here is a step-by-step guide on how to get started.
1. You create a wallet
Cryptocurrency wallets are used to store and send coins. These wallets are similar to bank accounts and can be accessed through various applications or on your computer. You can also use these wallets for multiple cryptocurrencies.
2. Connect to an exchange platform
Exchange platforms allow you to buy and sell cryptocurrencies using fiat money (regular money). Some popular crypto exchanges include Coinbase, Bittrex, Gemini, Poloniex, Kraken, etc. It is a good idea to take some time to do research online before choosing a platform so that you can choose the one that best suits your needs.
3. Deposit Money into an Exchange Account
In order for you to buy cryptocurrencies on an exchange platform, you need to deposit money into your account first. This is done via bank transfer (some platforms offer other payment modes as well). This can take up to several days depending on the platform you use.
4. Start buying and selling Cryptocurrencies
After a money deposit, you can start buying and selling. And start your crypto trading.
How are crypto transactions verified?
Cryptocurrency transactions, like Bitcoin transactions, are verified by miners. Miners are people who use computer hardware to solve difficult mathematical problems. The results of the calculations are used to verify transactions and are also used to determine how much of a cryptocurrency an account is entitled to. If a miner verifies a transaction correctly, they’re rewarded with newly minted currency (a process known as “mining”), but in the case of Bitcoin and other cryptocurrencies, the reward is paid in the form of newly minted cryptocurrency.
When someone makes a Bitcoin or other crypto-based transaction, it’s sent to a miner, who uses their computer hardware to verify that it’s valid and include it in their blocks of verified transactions. When their block is complete, they’re paid in newly minted currency by the network as a reward for verifying the transaction correctly.
What information do I need to send a cryptocurrency transaction?
There are 3 pieces of information you need to send a cryptocurrency transaction:
1. Recipient’s address
2. Amount of the cryptocurrency you want to send
3. The private key for the wallet the funds are coming from
If you’re sending funds from an exchange, it will be the exchange’s wallet address and private key. If you’re sending funds from a hardware wallet like a Trezor or Ledger, it will be your hardware wallet’s address and its private key. If you’re sending funds from a software wallet like Exodus, it will be your software wallets’ address and its private key.
Is it possible to cancel a cryptocurrency transaction?
The answer is a solid no. Transactions are irreversible, so you need to be careful when sending crypto. Before making any transaction, make sure the address is correct, and double-check that you’re sending crypto to the right recipient.
When you send crypto, your wallet first calculates all the relevant data, including your private key and the recipient’s public key. The transaction is signed with your private key, which is essentially your digital signature, and then sent to the blockchain for processing. The blockchain validates the transaction using your public key, and then sends it to miners for confirmation. The only information displayed on the blockchain is a string of characters representing your public key and the public key of whoever you’re sending crypto to. Your personal information is never revealed or shared with anyone at any point in this process.
Once a transaction has been processed by a miner and included in a block, it cannot be reversed or canceled under any circumstances. This ensures that all transactions on the blockchain are secure and permanent.
What are a public address and private key?
What is a public address?
A public address is used for receiving funds. It’s similar to an email address – anyone can search for your public address online and send funds to it. You can share your public address as much as you want.
Let’s say Bob wants to send me some bitcoin. I give him my public address, which looks something like this: 1DY6Uzv6hXD9NfV7Fqr3PqVdPbk6mw2QG8.
Then Bob will send me 0.01 BTC at that address (which only takes seconds). After I receive the payment, I can check my balance by looking up my public address on a blockchain explorer.
What is a private key?
Your private key is used to access your funds. Make sure you keep it safe because anybody who has access to your private key can spend your funds.
What is a public block chain?
It is a distributed ledger that is completely open to the public and anyone can join and participate in the network.
The participants in a public Block chain network are anonymous and they are free to transact with each other without any real-world identity. The transactions on a public Block chain network are approved by the consensus mechanism of the network.
Public block chains are permission less networks and anyone can participate in these networks without gaining any special permission or paying any fees to join.
Public blockchains are generally faster than private or consortium blockchains because they do not have a single point of failure and there are thousands of nodes validating transactions on the network.
