Bitcoin is not like a simple currency we use in our daily lives, such as dollars, INR, EURO, etc. Even the understanding of their transactions is straightforward. We know how online payment systems of fiat currency work because we sense that third parties like banks and financial companies are controlling it, but bitcoin is different from the process.
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Since there is no government, financial institutions are working behind this digital coin; instead, nodes or miners are working behind it. Visit site here to know more about bitcoin trading
What are bitcoin transactions?
We do daily transactions to fulfill our necessities with the domestic currency. We use different methods such as cash-in-hand transactions and transactions via online payment applications. Similarly, the bitcoin transactions work, but there is no staff of the company controlling the transactions or updating the transaction, but computers all over the world are controlling or managing it.
An automatic system validates the transaction when we make the online payment via a domestic currency payment option. In case of any error, the organization’s staff checks and resolves it. In the case of bitcoin cryptocurrency, there is no automatic system that validates the transaction, but all the miners have to solve the transactions or validate the transaction manually.
Understand the keys of bitcoin:
Key plays an essential role in the bitcoin cryptocurrency because many people do not know about the keys. Many users use bitcoin exchanges rather than separate bitcoin wallets as they are unaware of the bitcoin keys. There are two bitcoin keys to perform the two main functions in the bitcoin transactions given below:-
- Public key:- Public key of bitcoin is the receiving key which means you will receive the bitcoin on this key. We heard the name public means you are safe to send it publicly, and no one can steal your bitcoin by accessing your public key address. You will also get the public key in your bitcoin exchange wallet by clicking on the receive button. Some wallets also generate QR codes, so it is easy to receive bitcoin to your wallet address. The public key is the same as the mobile number from which we receive calls and messages, and no one can steal any data by getting our mobile number.
- Private key:– As the name of this key describes, you can spend your bitcoin via using this key, and you need to keep it hidden or safe from others; otherwise, you can make your bitcoin wallet zero. Because anyone can make your wallet zero by getting your private key. If someone accessed your wallet by calling your wallet password and the amount of bitcoin also appears to him, he cannot send the bitcoin to another wallet because of a private key. When we use Google Pay, Phone Pe, Paytm, and Online banking and try to send payment to another account, these applications ask for the PIN or OTP for processing the transaction, and without the PIN, you cannot process further.
The role of input and output in bitcoin transactions:
Input and outputs in bitcoin transactions are too confusing for some bitcoin users. Still, in simple words, inputs are the transactions that someone received in his wallet, and outputs are the number of transactions someone spends on another wallet and gets the additional bitcoin than the spend if any. There is the following illustration to understand it straightforwardly:-
Suppose you want to spend one bitcoin in your friend’s wallet named Mr. X. When you send a bitcoin to his purse, the blockchain will broadcast your transaction on the blockchain network to verify by the miners working behind the network. They will check your wallet inputs (you received bitcoin from another wallet).
Suppose you receive 0.70 BTC from Mr. Y and 0.70 BTC from Mr. Z, which means you have 1.40 BTC in your wallet. It means you had two inputs, i.e. you received half from one wallet and a half from another wallet. You requested one bitcoin to transfer from your wallet to the wallet of Mr. X, and now there is also two output which first is 1.40 BTC (total bitcoin you have) and the second output is 0.40 BTC you will receive back to your wallet because one bitcoin will transfer to Mr. X after validating the block.