The substantially low cost of transfer of cryptocurrencies makes them an extremely well-suited medium for cross-border money transfer. Take a look at exactly how payments are transferred in blockchain:
People who wish to transfer bitcoin to another entity/person, publish their intention and the nodes scan the complete bitcoin network to validate that the sender has the requisite bitcoin and that they haven’t already sent it to someone else. Once confirmed, the transaction is included in a block that is attached to the previous block.
That was a rather simple version. Here’s a little more technical version:
1. The sender’s bitcoin wallet holds their bitcoin address, which stores a record of all of their transactions, and thus their balance.
2. The bitcoin address, which is a long string of 34 letters and numbers, is known as the public key. Each public key has a corresponding private key, which is a string of 64 letters and numbers. Remember, these two keys are related.
3. Any transaction from a bitcoin address needs to be signed with the private key, which is done by putting in the private key as well as the transaction details into the bitcoin software on the sender’s device.
4. The program then puts out a digital signature that is sent to the network for validation.
5. The transaction is validated by inputting the signature and the public key into the bitcoin program. In case you were wondering, validation in this context means that the sender owns the bitcoin being transferring and that it hasn’t been already sent to someone else.
6. Now, the network will confirm that the sender hasn’t already spent the bitcoin by scanning their address history, which is possible since it knows the sender’s public key and because all transactions are public on the bitcoin ledger.
An Introduction of Blockchain
Common Blockchain terms that you should know about