Blockchain technology allows for peer-to-peer transactions, meaning you can send funds directly to another person without going through a bank or credit card company.
While the average confirmation time did spike towards the end of 2021, in 2022, the average confirmation has taken fewer than 30 minutes:
But how does this transformative technology actually work?
How Bitcoin transactions work
1.The network collects transactions made at around the same time into blocks.
2. Blocks come together to form a currency-specific “chain,” an online decentralized record of every transaction ever made in that currency. The network recognizes a transfer as valid when that transaction gets formally included in the blockchain.
3. The entire network must agree on the validity of a transaction (a.k.a. “come to consensus”) before it gets confirmed on the blockchain. When you initially send a transaction, it enters one of three states: unconfirmed/pending, confirmed, or rejected
4. Your transaction fee goes to miners, a network of high-powered computers that get paid to validate transactions on the network. The size of the fee you include encourages miners to work on your transaction.
5. Miners prioritize transactions with higher fees so if your transaction has a low fee, it may take longer to confirm as you’ll be towards the back of the queue. Your Blockchain.com Wallet uses dynamic fees meaning it chooses a fee based on how busy the network is. The busier the network, the higher the fee.
6. If the fee doesn’t cover the work the miners have to do, the network will reject it entirely. Don’t worry if this happens: it means your funds never actually left your wallet.
7. In most cases, the fees suggested based on network traffic will cover the transaction, causing them to confirm quickly, often in just a few minutes. You have successfully sent bitcoin.
That’s it. With every transaction you or anyone else makes on the Bitcoin network, you add to the blockchain and help build towards an open financial future.