How The Blockchain Transfer System work

Do you know how the Blockchain transfer system works. Here Coding compiler will explain you about the how Cryptocurrency transfer or blockchain transfer works. It’s a high-tech process, and very few people can understand it. Here we try to explain each aspect of the system how Blockchain transfer system works.

Three Components – Cryptocurrency, Mining, Blockchain

Cryptocurrency, mining, blockchain – these three concepts are inextricably linked, but each has its own characteristics. And most importantly, some of them may even exist in isolation. However, it is worth starting with definitions.


A limited set of numeric values ​​that satisfy the requirements of the constraints given by mathematical equations. These values ​​are quite acceptable to use as a means of payment.


A database of transactions distributed among all elements. At the same time this database is attached to each such element with any movements in general of all elements. This approach allows you to prevent fraud (in relation to cryptocurrency – to prevent unreasonable emissions).


From eng. “To mine” – to dig, to mine – the process of extracting the above cryptocurrency values. Technologically, mining requires a large amount of computational power, since to find each new value, it is necessary to perform increasingly complex algorithms.

Question: so what needs to be done so that some numerical value, even if it is found with great difficulty, is perceived by society as money? Perhaps you need to meet the following requirements:

  1. Each such value must be unique and not replaceable with other values.
  2. Impossibility to make additional unreasonable emission of such values.

From all this it follows that for the circulation of a cryptocurrency it is required to keep under tight control the movement of each of its numerical values ​​(the movement means the situation when the cryptocurrency changes the conditional address of its “registry”, that is, the owner’s wallet). This is precisely the security of monetary circulation. That is what the proud name, which has already become a household word, is “blockchain translation”.

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Cryptocurrency Transaction

Cryptocurrency transfer is a transaction. What, in the traditional sense, is this? Usually some kind of transaction, for example, an aggregate operation, when someone exchanges something. However, considering the process in more detail, it becomes obvious that its meaning is to move. It is enough that an object simply migrates from one place to another, as this can also be recognized as a transaction. This is quite true, because if someone gives you 100 rubles (lend or just like that), then moving the bill from the giver’s pocket to your own can be called a deal option.

Movement does not have to be physical, that is, to be associated with the material movement of objects. If we are talking about the binding of a virtual object to its virtual address again, then the transaction will be considered a simple change in the address of this object.

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Example: User “A” sent the user “B” an e-mail from his e-mail box to the mailbox B. Both “A” and “B” use the same e-mail service. That is, in fact, the letter did not leave the limits of the information contour of the postal service, but the addressing of the letter has changed – now its content is available for “B”. This action can be considered a transaction.

Translation of a cryptocurrency is a simple change of the address of those block headers (the desired mathematical values ​​of the cryptocurrency), which are included in the transferred amount. Previously, they were listed at one address, and now – at another. A transaction occurred, and it is this fact that should be protected and ensure its uniqueness, not to give any hostile forces (such as hackers) to create and make a record in the database (for example, according to which 186 billion are transferred to the wallet of this hacker Bitcoins). And it is precisely for use as such a universal guarantor that blockchain technology is used.

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By the way, the figure of 186 billion Bitcoins is not taken “from the ceiling.” 07/15/2010 just such an attack took place to be. Probably, “cybernaters” were not sufficiently aware that no more than 21 million bitcoins could exist. Therefore, the transaction was quickly tracked, removed from the blockchain, and the confirmation procedure was supplemented with new requirements. As a result of these measures, such incidents no longer occurred. In practice, this proves the viability of the idea, the literacy of the embodiment, and the modernization potential of the blockchain technology).

The Transfer Fee

To understand what a transfer fee is for the functioning of the blockchain technology, it is necessary to make a few explanations regarding the mining of cryptocurrency. Mining involves two highly important processes in the world of crypto.

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Calculation of new cryptocurrency values

The process involves the solution of a large number of mathematical equations and the subsequent choice of permissible solutions is the most “beautiful”, that is, preferred from the standpoint of other specified parameters. For example, this parameter can be the number of zeros after the comma, but before a numeric value. Successful mining requires advanced computer computing capabilities. Trivial graphics cards do best with this.

However, the complexity of the process increases, and exponentially: each subsequent sought value is more and more difficult to find. The most important individual characteristic of any virtual coins is their current complexity.

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Example:  The current complexity of mining the first-generation cryptocurrency – Bitcoin currently stands at 1,364,422,081,125. While the whole of 2009, this value was 1. Simple graphics cards are no longer enough for mining Bitka. It is mined with specialized equipment – Ashikami (the principle is the same, but the productivity is about an order of magnitude higher).

The extraction of the desired values ​​of cryptocurrency (according to science they are called block headers) can also be viewed as a business project: the investment is an investment in equipment (video cards), while the proceeds are the cryptocurrency itself. But not only…

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Formation of new blocks

So, each unit of virtual coins can be represented as a mined header with a transaction database attached to it – a blockchain. The last can be represented as follows: take paper clips and begin to fasten them together in a chain. Make some such chains. And now “stick” the first link of all these chains to an ordinary magnet.

This magnet is a heading; each clip is a block; each chain is a sequence of transactions completed with a header. Moreover, the number of chains corresponds to the number of magnets (headers) in the database. In other words, the principle “every element of the database has information about the movements of all its elements” is implemented. Each header in the Bitcoin system “attaches” a database on the movement of all headers in general in this system.

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Filling each block with data about the transaction

It is impossible to change anything in the previous block (this is impossible from the point of view of the design of the program code). Therefore, the only way to arrange the blocks is sequentially, forming a chain. It turns out the blockchain. And other chains of clips represent a transaction history for other headers. If any of the headers is moved, then information about it will immediately be distributed to all the blockchains without exception of all the headers instantly and automatically.

Who creates these clips (blocks)?

It is more correct to ask who fills them with content about the transaction? Of course, this is done automatically (that is, it is done by a computer program). But let me, at least 1 … computer is needed for the operation of computer software. And for the functioning of the whole monetary system of such computer capacity oh how much demand! So filling the new blocks with transaction data also falls on the shoulders of mining equipment.

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Pay Miners

No need to think that for miners the creation of new blocks in a distributed blockchain database represents some “socialist obligations” in terms of additional workload. Any transaction in the Bitcoin network runs with the obligatory collection of commission. This commission is the payment to the miners for conducting the corresponding algorithms, as a result of which new blocks appear in the blockchain, and users have the opportunity to pay in cryptocurrency, for example, for coffee.

What exactly is included in this algorithm, for what and in what amount funds are raised – about all this further.

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What determines the size of the commission

Before you judge the size of the commission, you should understand what it is charged for. The blockchain is simple, ingenious and thoughtful, but they still need to be able to competently use. However, it is quite simple (naturally from the point of view of technological ideology). Each time the user confirms his right to dispose of the Bitcoins attached to this particular address (for example), he enters his access keys, drives in the address where he needs to be transferred and presses “Enter”.

And the transaction goes on confirmation. And it confirms none other than the initial state of those headers that are supposed to be moved to the address specified by the user. In reality, the last final state of the blockchain for this particular header and block is compared to six (this is important!) With the same blocks, only in the blockchain of other headers (that is, only 6 block headers are involved in the confirmation process).

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Why 6? Because the calculations show that a possible fraud already with 6 headlines acquires quite a hypothetical probability (less than 0.001%). Those who wish to cheat will have to somehow make in the blockchains of each header (i.e., all Bitcoins in general) information about the fake transaction. This in itself is extremely difficult to implement, and verification reduces this possibility to zero.

Verification is scientifically called evidence collection. And such a regular fee, carried out before each transaction, without exception, is carried out by a full-time Bitcoin program specifically designed for this. Naturally, in the event that at least one confirmation is not received, the whole process (together with the funds on the account) is blocked.

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Over time, the number of Bitcoin transfers (i.e. transactions with their transfer) is increasing, and therefore this way of earning for miners becomes more and more attractive. After the last header of the last Bitcoin block is found, the miners’ earnings in the network of the same name will consist of commissions alone for actually creating new blocks. However, it seems that this will happen only after a multiple increase in the volume of transactions with Bitcoin.

In August 2017, a new fork appeared: the classic Bitcoin split into 2 cryptocurrencies. There was a “branch” – Bitcoin Cash. This happened because the volume of the Bitcoin blockchain exceeded 164 GB and using existing algorithms for working with it, the procedures began to be unacceptably lengthened over time. Thus, confirmation of transactions began to stretch to two days, which, of course, is unacceptable for normal economic activity.

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This separation is needed precisely to solve this problem. As a result, the technology of compact data writing into a unit was implemented, which allows increasing the capacity of the latter by 8 times. And the speed of transaction processing has again become acceptable, but still it may seem too slow to someone.

Summarizing, we can say that the size of the commission depends on:

  • from the amount of funds transferred;
  • from the required transfer speed;
  • from the repeatability of this operation (the more often, the lower the commission).

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How to calculate the commission

Any cryptocurrency network is pretty well adapted to the requests of a typical user. Everything is quite ergonomic:

  • there is a mode of automatic determination of the commission;
  • it is not necessary for the user to think about the commission at all for conducting a transaction;
  • moreover, if necessary, the level of commission can be set manually (in order, for example, to speed up its passage).

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An example based on the wallet «Electrum». If you move the “Fee” slider, the commission charged will vary in the range of 0.00001660 – 0.00105860 Satoshi. In this case, the change in the rate at which the next transaction confirmation is sought varies from 1 to 25 blocks.

Miners take their commission for finding evidence of each action, as a result of which new blocks appear. The standard commission is 0.0001 BTC. And then the transaction, as they say, gets into the general queue.

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However, if the transaction amount is more than 0.02 BTC, then it will already be charged at a higher rate – 0.0002 BTC and will be considered first. But there are options in which billing will generally be zero. For this, the enumeration volume should not exceed the value of 0.01 BTC, and the volume of the recorded data should not exceed 1 kilobyte.

We transfer cryptocurrency to another blockchain, save on commission

Not so long ago appeared technology sadchayn. In many ways, it duplicates business ideas that regularly come to ICO and even have a real implementation. In short, we are talking about cross-currency relations. It is no secret that the Bitcoin blockchain is now more overloaded than the blockchain of the same Ethereum. In order for owners to have the ability to quickly move from one type of cryptocurrency to another, sidechain technology has appeared.

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Its essence can be compared with the scheme of swap contracts: “You’re here for me, I’m there for you.” For those who want to get at the output, for example, the Lightcoins, having the same Bitcoins in their hands, it is enough to send the later to a certain, specialized address where they are “frozen”. No one else has the right to “touch” these Bitcoins.

The same thing happens in the next blockchain (in the Lightcoin network). Further, the client uses the equivalent in Lightcoins of his frozen amount in the “Bitcoin”. And this frozen amount can be used for those who want to switch from the Lightcoins to the Bitcoin network.

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