Since Bitcoin (BTC) was launched back in 2009, it has evolved into one of the busiest blockchain networks in the world with non-stop traffic. Both crypto traders who deal with BTC on a daily basis and crypto beginners who want to buy and hold some Bitcoin need to know how BTC transactions work.
The most basic operation when buying or exchanging your bitcoins is called a BTC transaction and it serves the same purpose as a fiat money exchange process or when you’re paying for a product with your fiat cash in a store. The fact that BTC doesn’t exist physically means that it has to change ownership by means of digital transactions when individuals change the blockchain location of a certain amount of BTC.
These transactions can sometimes take longer than usual because the network is often really busy and several factors can make your transaction take longer or it can even stay unconfirmed.
Let’s take a look at how the BTC blockchain works, what transactions are, and how you can stop or reverse a transfer with one or fewer confirmations.
BTC Blockchain Basics
When Satoshi Nakamoto launched Bitcoin in 2009, the project introduced blockchain technology as a viable solution for digital currencies. Blockchain technology is based on a decentralized peer-to-peer network that works as a public ledger of transactions, run by independent network nodes that validate transactions.
Before the launch of the BTC blockchain, only digital payment services that run on a centralized network such as Visa or MasterCard existed. All transactions on such networks need to be verified by central authorities and, of course, those transactions need to be backed by fiat money, while Bitcoin introduced the concept of decentralized, digital cash that doesn’t need any central server or authority.
Instead, the blockchain is managed by thousands of network nodes that are actually Bitcoin miners and their computers. The fact that the blockchain is public means that anyone can monitor transactions on the network using a block explorer such as Blockchain.info, but users can retain a high degree of anonymity since they don’t need to associate their name with their Bitcoin address. This is very handy for monitoring your transactions when you send someone a certain amount of BTC and want to see has it reached its destination address.
The data that travels through the blockchain is kept in the form of data blocks. Each block can hold 1MB of transfer data and the blocks are set in a chronological string from first to last. A great thing about the Bitcoin network is that its programming code doesn’t allow anyone to alter data blocks that are already approved and added to the chain. This way it’s practically impossible for someone to steal bitcoins by sending them to another address instead of the one that’s already approved and added to a Bitcoin block. The only way someone could possibly alter the contents of a data block is if they control 51% of all network nodes and therefore the authority to change a block, but such an elaborate cyberattack is hardly possible because of the size of the BTC blockchain.
Many popular cryptos such as Litecoin (LTC), Bitcoin Cash (BCH), and Ethereum (ETH) copied the best aspects of the BTC blockchain.
BTC Transfers
Bitcoin transfers are the most basic day-to-day operation when trading BTC. Because of the fact that BTC doesn’t exist physically and it can never leave its native blockchain network, Bitcoin transactions had to be invented as a method for exchanging coins and making Bitcoin payments. When a BTC transfer happens, no bitcoins are actually changing places. Instead, the digital footprint that shows a blockchain address of a certain amount of Bitcoin changes its blockchain location.
A public address or BTC address is the Bitcoin blockchain location in which your digital assets are stored. That’s typically a crypto wallet address or a crypto exchange platform account address. The private address or private key is a sort of password that proves your ownership over the BTC that’s located in your public address. With the private key, you can initiate transactions of your funds and manage them as you like.
When a BTC transaction is initiated, a cryptographic message is sent through the blockchain. The message contains data about the amount of BTC you’re sending, the sender address, receiver address, a transaction ID, and various transfer metrics. The transaction data first ends up in a mempool (memory pool) from which BTC miners select transfers based on the transaction fee that’s included with the transfer. You should always include at least an average transaction fee to make sure your transfer gets processed.
Once a miner selects your transactions, they start processing them with the hashing power of their mining rig until they find the appropriate 64-digit transaction hash that corresponds with your transaction. This process is required to make sure your transfer is valid and not a double-spending attempt. Once the miner finds the right hash, they send it out to the rest of the network in order to get multiple independent confirmations that the hash is adequate. This is called proof of work, and it’s a consensus mechanism that makes sure there are no fake transactions.
After your transfer gets validated, it’s included in the next block, which is added to the blockchain once it’s filled with 1MB of approved transactions. Only after this process can your transfer reach its destination address.
Why Are Your BTC Transfers Unconfirmed?
The BTC blockchain has a flawless working mechanism, but it can often get quite busy because of immensely high network traffic. This often happens in times of high Bitcoin volatility when the price of the coin is rapidly jumping or falling and traders are buying or selling increased volumes of BTC. During high network traffic, the usual 10 minute transaction processing time can extend drastically, and sometimes transfers are delayed even for several hours. This is a prime reason why transfers sometimes take a longer period of time to get confirmed and it’s generally advised to wait 24 hours in such cases, to see if your transfer will go through eventually.
Another popular reason for unconfirmed transactions are low transfer fees. If you set a too low fee, especially if there’s lots of traffic, miners will constantly select other transactions with higher miner fees to process them instead of your coins.
Finally, an unconfirmed transaction can surely happen if you’ve misspelled the destination address and there’s no such BTC address on the blockchain.
Stopping/Reversing a BTC Transaction
Once your transaction has received at least one confirmation on the blockchain, you won’t be able to stop it or reverse it. The BTC programming code doesn’t allow you to alter a transaction that’s been initially confirmed. That’s why you should monitor your transaction through Blockchain.com and check its progress.
In case your transaction hasn’t received any confirmations, you can do two things. You can create a higher fee double-spend transaction with the same amount of sent BTC. This means that you’ll spend twice the amount of BTC you initially planned and it can be quite stressful, especially if you don’t have that many funds at your disposal.
The second and far better solution is to reverse your transaction using the RBF (Reverse by Fee) protocol. This protocol is featured in many reliable Bitcoin wallets and it enables users to send a cryptographic command through the blockchain that will reverse your original transaction and send it out again with a higher transfer fee. This is a very handy feature and it’s highly recommended to check if your wallet supports the RBF protocol before sending out a BTC transaction. Samurai Wallet is a very reliable BTC-compatible, secure wallet that supports the RBF feature.
A Few Final Words…
While BTC transactions are considered a basic process for traders and cryptocurrency enthusiasts, it’s really important to know how the technology behind transactions works. If you know how BTC transactions work, you’ll be able to understand the possible reasons for an unconfirmed transaction and how to stop or reverse it.