16 Sending Money and Receiving It

16 Sending Money and Receiving It

The Bitcoin Transaction

The Bitcoin system is very different to what many have become accustomed to. Because banks essentially control our money, we have got used to a ‘pull’ system, which basically means that other people can pull funds from your account without you knowing. It’s possible that any one of us could wake up on any given day and find money missing from our account. Maybe its a direct debit, a bank charge, a transaction that was reversed or even the bank frozen and funds seized. These are the powers that banks and even other external entities can have over your money. Money can be ‘pulled’ from your account at any given time. This could also put you into negative territory and you find yourself in overdraft. Bitcoin on the other hand is a ‘push’ system, meaning that funds can only leave your wallet if you actually send it specifically. There is never a time that money can be taken without your knowledge (unless someone has access to your private keys). So the procedure for a transaction in Bitcoin goes like this:
  1. Someone wants to get paid, so he ‘tells you where to hide the loot’, ie he gives you an address whereby you can send your bitcoin to.
  2. You then copy that address into your wallet and then construct a transaction.
  3. You input the necessary data for the wallet to form a message. Your transaction message.
  4. In this message you will have:
    1. The address where the Bitcoin comes from
    2. The address where the Bitcoin goes to
    3. The amount to be sent to the new address
    4. The address for the ‘change’ if there is any
    5. The fees to give to the miners for their time and effort (and to signify the urgency of this transaction)
    6. The ‘Mathematical Signature’ that proves you have access to the ‘from’ address, that it was your address from your private keys
  5. Once the message is formed, it is broadcasted to the world
  6. The miner sees the transaction and puts it into a block
  7. Once the block is found it is broadcast to the world for all the nodes to add it to their blockchain
  8. The transaction is completed. 
Now if anyone wants proof that the transaction took place, they can just go to any node (or their own node) and ask it “Did this transaction take place?”.

Footnotes

No Footnote provided.

Further Reading

No Further reading available.

Leave a Reply

Your email address will not be published. Required fields are marked *

fifteen − 4 =