Let's tell a story about bitcoin transactions

[Pablo-wood]

Hi mates let's assume I own a jewellery store and you came by and in the course of searching through my showcase you got interested in one of the jewelries. And it costs $110.25 and you choose to pay via BTC. Unlike your unusual bank app where you will request for bank details and make payment using account number. In the Bitcoin ecosystem an address is needed. Let's keep it simple but this address creation requires a few step which might make our story technical which might be boring.

For this transaction to begin a request has to be made. Which simply means you are creating a transaction request. In our everyday experience we can liken this to a cheque. You know a cheque  requires your hand written signature to prove your ownership. In the case of Bitcoin the signature is digital without pen and paper.

Remember a signature is needed so after the request is initiated there should be a way to ensure you own the coin you want to spend or no one is impersonating you, so the need for this digital signature sets in. This signature in our case is a special kind of code that proves you are the owner of the Bitcoin you want to spend. If you have heard of private keys then that's the special code we are referring to. Take it to be like a secret password that belongs to only you.

This signature now acts like an "ok" notification which implies everything is good. A way of verifying that you have the authority to send the Bitcoin and you really want to send it .

At this point after the signing the transaction, to ensure your transaction is valid it must undergo validation in the Bitcoin network which is simply carried out by Miners. Where this Miners pick up this transaction and add them to the Blockchain through a series of process. This Blockchain is a public ledger that keeps track of all transactions .

After this transaction is verified and added to the Blockchain chain it officially becomes mine and the transaction becomes successful.

[Darker45]

Ideally, this is how Bitcoin transactions take place. It's peer-to-peer. In reality, I'm afraid Bitcoin transactions are mostly happening through centralized services or via payment gateways.

Here in my country, for example, the most popular way of paying through Bitcoin is via a mobile wallet that's custodial. Perhaps in other countries or online, payment gateways such as CoinGate or BitPay are mostly used.

Either way, somebody else is signing on your behalf. That you have to sign your transaction to prove that "you are the owner of the Bitcoin you want to spend" doesn't apply. It's because you don't essentially own your Bitcoin anymore. You're actually not in control of it anymore. So, it's third parties that make the signature because they have the private keys.

This isn't how Bitcoin is supposed to be spent, but I guess it's the most popular way. Now, that's a sad story to tell. Not your keys, not your coins.

[BlackBoss_]

Hi mates let's assume I own a jewellery store and you came by and in the course of searching through my showcase you got interested in one of the jewelries. And it costs $110.25 and you choose to pay via BTC. Unlike your unusual bank app where you will request for bank details and make payment using account number. In the Bitcoin ecosystem an address is needed. Let's keep it simple but this address creation requires a few step which might make our story technical which might be boring.

The rest part is no interesting, I only discuss this part.

With Bitcoin blockchain, you can broadcast your Bitcoin transaction from your non custodial wallet, without any dependence on any centralized exchange. It's your freedom, but only if you use a non custodial wallet, store your bitcoin there, and it is always ready to be broadcasted by you.

If you use a centralized exchange, store your bitcoin in an exchange account, in custodial wallet, you don't own private key, and as saying "It's not your private key, it's not your bitcoin". You can not broadcast your bitcoin transaction, and will have to make a withdrawal request to that centralized exchange. It is similar to bank and bank transfer.

[cryptoaddictchie]

I like the idea of peer to peer for businesses which accept crypto not only bitcoin. I mean its much more make sense if the crypto they gonna accept is something fast and secure to use like when the payment is needed it wouldnt be delayed as much as paying using visa or master card in a decentralized fashion. What sense if we pay in example bitcoin but sometimes the network clogged and in your unlucky day of buying it happened. So the seller need to wait first for your transaction to complete before releasing what you bought which is a downer on bitcoin side.

[EluguHcman]

You have just explained about how Bitcoin transaction is being processed and executed.
Good one though but thought you were going to analyse it simple to how Bitcoin transaction is far better than the bank method of payments.

While along the lines, the jewelry buyer only need your deposit address and the Blockchain network or your walley address and then proceeds to process the transaction.

One interesting transactions format about Bitcoin is that both the Bitcoin sender and the receiver would get transactions alerts that you are sending out and you are to receive a sum of Bitcoin on before the miners executes the final transaction successfully then the sender gets debited While the receiver is credited directly in their wallets.

One unique characteristic of this Bitcoin transaction system is the notification of incoming and the outgoing transactions before it is finally processed.
Then if the transaction is not yet processed, it is demanded that it could be network issues but then, it would be crystal clear that the transaction was going to be done successfully unlike the banks that the sender would tell you that he has sent the money with no evidence to prove.

Likely, the banks is been compromised where transaction dealers now forges fake debt alerts when convincing the receiver that the transaction has been made while told the receiver to keep waiting for the network before receiving the credit alert.

[Sim_card]

Ideally, this is how Bitcoin transactions take place. It's peer-to-peer. In reality, I'm afraid Bitcoin transactions are mostly happening through centralized services or via payment gateways.

Here in my country, for example, the most popular way of paying through Bitcoin is via a mobile wallet that's custodial. Perhaps in other countries or online, payment gateways such as CoinGate or BitPay are mostly used.

Either way, somebody else is signing on your behalf. That you have to sign your transaction to prove that "you are the owner of the Bitcoin you want to spend" doesn't apply. It's because you don't essentially own your Bitcoin anymore. You're actually not in control of it anymore. So, it's third parties that make the signature because they have the private keys.

This isn't how Bitcoin is supposed to be spent, but I guess it's the most popular way. Now, that's a sad story to tell. Not your keys, not your coins.

That's in your country mate. Down here, we don't use any third party payment gateway. A shop that accepts bitcoin doesn't care from where you send your bitcoin from. You only send to their bitcoin address or scan the QR code. However, I feel the government regulation on crypto in your country makes it that way. The only time I use an exchange is to use their p2p service.

[hugeblack]

Hi mates let's assume I own a jewellery store and you came by and in the course of searching through my showcase you got interested in one of the jewelries. And it costs $110.25 and you choose to pay via BTC.

What jewelry costs $110.25, the lowest price for a necklace is ~$600 which is usually pretty narrow and light so I think the average for such a store would be over $1000, and with no refund option I don't think I would pay bitcoin to an anonymous online jewelry store. Usually selling such items is done in forums and trusted merchants like here but online stores need to gain a lot of trust first.

[Findingnemo]

There's no need for everyone to know technology details of how Bitcoin transactions works, we can skip the details and say I request X amount in BTC and the buyer will send the funds by scanning the QR code with necessary fee, that's it right?

Let's imagine when someone sending funds from apple pay, do you think they really know or care how the funds initiated from my wallet and ended up on other end, the money recieved that's what matters and when someone accept Bitcoin they should not consider unconfirmed TX as payment, they have to wait for atleast 1 confirmation.

[notocactus]

What jewelry costs $110.25, the lowest price for a necklace is ~$600 which is usually pretty narrow and light so I think the average for such a store would be over $1000

Assumption in merit fishing stories can be very unreal!

This story is like that, I am sorry to OP if I am wrong.

And with no refund option I don't think I would pay bitcoin to an anonymous online jewelry store. Usually selling such items is done in forums and trusted merchants like here but online stores need to gain a lot of trust first.

Refund is more possible with bank transfer and with Bitcoin transaction, there is on chain transaction fee that can be deducted to refund value.

It is safest and best to aware about risk of scam as well as expensive deduction even refund is accepted.

[BIT-BENDER]

The beginning of the story was quite interesting, the middle was still searching for substance but the ending for horrific. The story did not blend with the illustration meaning you shouldn't have even had a story in the first place and it will still come out the same.
I don't get it why people what to liking Bitcoin with Fiat or something else.
Bitcoin transactions is not the same with a cheque or Fiat transaction, they are different financial systems and this is important to note.

[BitMaxz]

Banks and Bitcoin seem similar based on what's in your story, but the big difference between banks and Bitcoin is that you have full control of your funds anytime you can send and withdraw your funds from your Bitcoin wallet, plus Bitcoin is decentralized, unlike banks. Anytime they can put your account on hold or close your bank account, it's problematic. You can't use your money from the bank if you need it.
As with my friend's bank account, when he needs to withdraw money from his debit card, he is unable to do so because the bank has placed it on hold.

Another unique thing about Bitcoin is that it has limited coins available, unlike money banks can print more money.
About privacy, Bitcoin can give you more privacy than banks and other BTC advantages.

[SamReomo]

So in this story you're basically trying to share that you understand how Bitcoin transactions work right? Good, that you have learnt some information about Bitcoin but if I were on your place then instead of using my Bitcoin to purchase the Jewelry I would use fiat for that purpose as fiat wouldn't cost me any fees in such case.

But of course when it comes to privacy then it's better to opt Bitcoin for such transactions but still when you're purchasing physical goods then you're already somehow not caring about privacy that much and in such case I believe fiat transfer is better and wouldn't cost much and can be safe as well.

There's no need to always use Bitcoin for transactions, and to be honest we can't use it everywhere, at least at the time of writing this post it's not possible to use Bitcoin in most places. I know in future things will change and we might be able to use Bitcoin easily for any type of purchases but as of now it isn't acceptable everywhere and that's why other online payment processors still operate with millions of users.

[Darker45]

~snip~

That's in your country mate. Down here, we don't use any third party payment gateway. A shop that accepts bitcoin doesn't care from where you send your bitcoin from. You only send to their bitcoin address or scan the QR code. However, I feel the government regulation on crypto in your country makes it that way. The only time I use an exchange is to use their p2p service.

That's true in my country and true in many others, mate. I'm happy that in Nigeria you don't use third party payments. But I doubt it. When you speak of P2P, for example, do you refer to legitimate P2P or fake P2P? If you're using P2P on Binance, ByBit, OKX, and other centralized exchanges, do you sign Bitcoin transactions? Are the private keys in your possession? Is it you yourself who release Bitcoin or you're asking a middleman to do it for you?

Anyway, in addition to my government's regulation or lack thereof, I guess it's also about lack of awareness, convenience, transaction cost, indifference to financial freedom, and so on that make the situation like this.

[Saint-loup]

I'm not sure its really relevant either educational to compare a handwritten signature with a BTC private key to be honest. A handwritten signature is directly related to you, and it deals with your personal biometric characteristics, so you can't tell someone to sign a bank cheque or a contract for you. So it's a legal and real proof of identity and agreement. A BTC private key can be given to anyone and stolen without even the owner's knowledge, then it can be used to spend all the funds belonging to the address and to sign any message from it, the initial owner will never be able to get it back neither to revoke it unlike some other cryptographic key such as PGP keys. So it's far away from a handwritten signature and can't replace it in most cases unfortunately.

[hd49728]

BTC private key can be given to anyone and stolen without even the owner's knowledge, then it can be used to spend all the funds belonging to the address and to sign any message from it, the initial owner will never be able to get it back neither to revoke it unlike some other cryptographic key such as PGP keys. So it's far away from a handwritten signature and can't replace it in most cases unfortunately.

With Bitcoin, users have to keep their private keys safely, and they have to consider of extra security layers. If they lose private keys, they lose their bitcoins as hackers or bad people will not hesitate to broadcast a transaction with very high fee rate to get a quick confirmation from miners. After a confirmation, it is not reversible and your coin lost forever.

Cold wallet, ari gap wallet, multisig wallet are most secure options for Bitcoin users but of course a single signature wallet is good with strong wallet password and a clean, uninfected device.