How Transactions Work on the Bitcoin Blockchain Part 3

How Transactions Work on the Bitcoin Blockchain Part 3

How Transactions Work on the Bitcoin Blockchain – The Path of a Transaction from A to Z Part 3

 

As you are reading this article, the number of Bitcoins in circulation is over seventeen million, which is over 80% of all bitcoins that will ever exist because Satoshi Nakamoto has designed the network in such a way that it can only have twenty one million bitcoins.

According to his vision, after the network adds all twenty one million bitcoins to circulation, it will keep functioning because users will be transacting with each other and including fees with their transactions. On the Bitcoin network, miners keep 100% of the fees that users include with their transactions, which means that with a sufficient number of users on the network miners would still have enough of an incentive to keep creating blocks of the blockchain.

 

Age of Bitcoin blockchain blocks

The second column in the table about Bitcoin blockchain is age. It shows how long ago a block has been created. The Bitcoin blockchain aims to create a block of the blockchain every ten minutes. A transaction on the blockchain requires at least six confirmations for the network to consider it to be valid, which means that after you buy Bitcoins using a Bitcoin ATM, you may need for about an hour for your wallet to recognize the transaction.

You can see the speed with which the Bitcoin network creates blocks of the network when you visit an explorer and look at the age column. For example, if the numbers in the table from top to bottom are 6 minutes, 10 minutes, 12 minutes, it means that the Bitcoin network created its last block 6 minutes ago. It took it four minutes to create the block that precedes the last block, and 2 minutes to create the block before the one before the last one.

Block creation time on the network is not always equal to ten minutes because ten minutes is the ideal scenario but we do not live in the ideal world. Sometimes miners compile transactions into blocks of the blockchain faster and sometimes they do it slower. The network monitors the speed of block creation and then adjusts the difficulty parameter to make the process go faster or slower.

 

Transactions on the blockchain

The “transactions” column of the table simply shows the number of transactions that miners included in the block. Typically, this number ranges from a few hundred to a few thousand. “Total sent” is the total volume of Bitcoins that the transactions include.

The Bitcoin network operates based on the principles of the free market. There is no minimum or maximum transaction size. This is one of the big advantages that the Bitcoin and other cryptocurrencies have over traditional banks.

When you use a regular bank to send funds, you would typically have to pay a percentage-based fee, meaning that the more money you want to send, the higher the fee that you will have to pay. You may also need to pay an extra fee and file a ton of paperwork if you are sending funds to a different country.

With Bitcoin and other cryptocurrencies, these limitations do not exist. You can send a small fraction of a Bitcoin to a friend in a different country or you can buy real estate in the same country and initiate a transaction that would be worth an equivalent of millions of dollars. This is why Bitcoin ATMs have such a great potential. They allow users to convert money from a currency that has a lot of restrictions, to a currency with no restrictions. Regardless of where you are sending funds and how much you are sending, it is you who is choosing whether you should include a fee with your transaction on the Bitcoin network and the transaction on the network will work in the same way.

When you use a Bitcoin ATM, it will most likely have a transaction limit, but this limit will be imposed by the government regulations, not by the Bitcoin network itself. Once you convert your fund into Bitcoin and have then in a wallet on the Bitcoin network, there are no limitations. You do not need some bank branch to be open, you do not need a permission from the government, or anything else. You can send your money when you want, to whom you want, and in the amount that you want.