How to Trace Bitcoin Transactions?

Bitcoin (BTC) and blockchain technology have enabled people to facilitate fast transactions of digital assets between any two virtual addresses in the world in under 10 minutes. Sure, there’s a bunch of altcoins that require far less time to process a transaction, like Ripple (XRP) and Ethereum (ETH), but Bitcoin transactions remain the most valuable on crypto market. That’s because of Bitcoin’s leading market position both in terms of value per coin and market cap, which is already well over 700 billion US dollars.

The Bitcoin market heavily influences the rest of the crypto world, so if BTC is going up, most likely a large portion of the market is also making gains, however, when BTC goes down, the market is known to dramatically crash. 

Bitcoin transactions are an essential part of the BTC ecosystem and all of those major buys or sell-offs that are known to trigger huge price changes are carried out through transactions on the blockchain. This, of course, wouldn’t be possible without the superb software architecture of the Bitcoin blockchain.

Let’s take a look at how the BTC blockchain works, what’s the mechanism behind Bitcoin transactions, and how you can track BTC transfers on your own.

Bitcoin Blockchain Basics

Bitcoin was launched back in 2009 as the first digital currency in the world. The idea of decentralized, virtual cash wasn’t new, but BTC was the first successful iteration of the concept. The successful launch of Bitcoin and the immense popularity it achieved ever since is largely due to the technology behind the project. 

Bitcoin crypto

The Bitcoin network was the first crypto blockchain and it was a revolutionary tech solution at the time. Numerous altcoins have since copied most of the BTC blockchain basics while adding their own, modified features to try and achieve the popularity and adoption rate of BTC.

Bitcoin’s blockchain is essentially a distributed, public ledger of transactions that is publicly visible through a blockchain explorer such as Blockchain.info

Blockchain Data Blocks

The blockchain consists of a linear string of data blocks that contain transaction data. Each data block can contain a maximum of 1MB of transaction data. Depending on the size of the transaction, a single block can contain several transfers. All blocks are set in a chronological line from first to last and a new block is verified every 5 to 10 minutes, which is the average transaction time on the BTC blockchain.

Blockchain data blocks are immutable, which means that once a block is approved and added to the blockchain, no one can change the content of the block. This is the key security measure of the BTC blockchain which prevents anyone from tampering with the approved blocks and transactions. The only way someone could change the contents of data blocks and steal funds is if they’d manage to gain control over 51% of the BTC network nodes which is nearly impossible, given the size of the network. 

Bitcoin Addresses

Since Bitcoin doesn’t exist physically, there has to be some sort of mechanism for verifying the ownership over coins and storing them safely in encrypted blockchain locations such as crypto wallets. This is done with the help of Bitcoin addresses and private keys.

Bitcoin worldwide reach

Public Bitcoin Address

A Bitcoin address or public address is the blockchain location where you can receive your BTC. When you have a Bitcoin wallet, you also have your personal BTC wallet address. You can freely share this address with people and platforms from which you wish to receive BTC transactions. All Bitcoin addresses are publicly visible through blockchain explorers and anyone can see the exact balance of BTC in any Bitcoin address. 

BTC addresses aren’t associated with personal info, so no one can see who is the owner of a certain address unless that person publicly reveals that they stand behind that certain address. That’s why many crypto exchange platforms have KYC (know your customer) protocols in place, in order to prevent money laundering, scams, and other criminal activities.

Private Bitcoin Address

Private keys are also referred to as private BTC addresses, and they act as passwords that enable you to manage the Bitcoin in your public address as you wish. Without access to appropriate private keys, you can send BTC payments and transfer your coins to third-party wallets or exchange platforms like Binance and Coinbase

You should never share your private keys with anyone, and keep in mind that your private key is a prime target for hackers and malicious individuals. That’s why it’s recommended to always use a trustworthy crypto wallet with multiple layers of security to store your private keys. 

Bitcoin Transactions

A Bitcoin transaction is the most common daily operation for BTC holders and traders. Since BTC never leaves its blockchain, when you’re initiating a transaction, you’re basically changing the virtual location on the blockchain. You’re using your private key to send funds from your BTC address to another party’s Bitcoin address. Once you send those funds to someone else’s BTC address, your private key can no longer enable you to manage those funds. 

Sending and receiving bitcoin mobile phone

When you initiate a BTC transaction, the first thing that happens is that the transaction, which is an encrypted message, goes into the blockchain memory pool. The transaction waits for a miner to select it from the memory pool, based on the transaction fee you’ve attached. The higher the fee, the faster your transfer will get selected for processing.

The Role of Bitcoin Miners

Miners act as BTC network full nodes. There’s no central authority in the BTC blockchain responsible for verifying cryptocurrency transactions. Instead, miners verify transactions and process them in exchange for transaction fees and block rewards of freshly mined Bitcoin. 

Once a miner selects your transaction, they use the computing power of their mining rig to find the appropriate 64-digit transaction hash that fits with your transfer. This takes a lot of time and computing power, so miners team up in massive online mining pools, where they join their computing power to find the right hashes faster and gain more rewards, which are then shared among mining pool members.

After a miner finds the right hash for your transaction, they send it out as proof of work to the rest of the network nodes in order to receive additional confirmation of the validity of the hash. When a sufficient number of confirmations are received, your transaction gets approved, added to the next block of the blockchain, and your transaction reaches its destination. The average transaction time is 5 to 10 minutes but sometimes it can take much longer.

Delayed Cryptocurrency Transactions

Sometimes a Bitcoin transaction can take much longer than the usual 5 to 10 minutes. This mostly happens in times of high network traffic, when the mempool is packed with pending transactions and miners are overwhelmed with the huge amount of transfers waiting in line to get processed.

Network Traffic

High network traffic usually happens in times of sudden BTC price changes. When the market is highly volatile, thousands of traders are simultaneously initiating buy, sell, and exchange orders, depending on the price action’s direction. The BTC blockchain has scalability issues that prevent it from handling such large transaction volumes fast because when BTC was launched, no one knew that at some point it would be worth several tens of thousands of USD per coin and that literally millions of people would actively be trading Bitcoin. 

Network traffic city

Transaction Fee Amount

When there’s high network traffic, the transactions with higher fees are the ones that get processed first. If you’ve attached an average or lower than average fee during high network congestion periods, your BTC transfer is surely going to take much longer than 10 minutes. In that case, it’s normal to wait up to 24 hours for your transaction to get processed. If the transaction doesn’t go through in that period of time, then it’s best to resend it with a higher fee.

Many Bitcoin wallets have the Replace-by-Fee (RBF) protocol which enables you to cancel your transaction before it gets confirmed by miners, in case it stays unconfirmed for a long period of time. The RBF protocol then resends your transfer, but this time with a higher transaction fee. You can manually set the transaction fee. You should always check if the BTC wallet of your choice has RBF features.

Tracing Bitcoin Transactions

When your BTC transaction is being delayed and you’re waiting for it to get processed through the blockchain, it’s super easy to check the transfer’s progress through the network.

All you need to do is go to the Blockchain.info BTC block explorer and paste your transaction ID (TXID) into the search bar in the top right section of the website.

Bitcoin transaction confirmation mobile

This way, you can see exactly what’s happening with your transaction and decide whether you want to wait until it gets confirmed or resend it with a higher fee.

Sometimes transactions get processed through the blockchain but your wallet receives a transaction confirmation much later. That’s why you should always first check the transaction’s progress on a block explorer before deciding to resend it with a higher fee.

A Few Words Before You Go…

Knowing how Bitcoin transactions work is highly important for crypto traders of all experience levels because if you understand the transaction mechanism and the reasons behind delayed transactions, you’ll understand that there’s no need to panic if your transfer gets stuck. Check the transaction’s status through a blockchain explorer and then decide whether you’ll resend it with a higher fee or just wait until the network traffic normalizes and your transfer gets processed by itself.