How Does a Bitcoin Transaction Work? Speed and Fees Explained
Bitcoin is a digital currency that uses a public ledger to keep records of all transactions since its inception. This data is publicly available and verifiable. However, when you transfer value from one address to the other on the blockchain, such a transaction is never instantaneous because Bitcoin isn’t the fastest cryptocurrency in the world. You might notice a quick update of the balance in your personal wallet. Still, in the background, several processes need to happen before the coins are officially yours.
One difference between cryptocurrencies is the time it takes for digital transfers to be confirmed on the blockchain. Bitcoin has a block confirmation time of around 10 minutes on average and a limited Bitcoin transaction per second count. That means that it takes miners approximately 10 minutes to construct a new block and select those transactions included in it. How long you have to wait for your confirmation depends on several factors, which will be mentioned and explained shortly.
What Are the Steps for BTC Transaction Confirmation?
When you click on the ‘send’ or ‘pay’ button in your crypto wallet, you send a signal to the network. That notification says: I want to send this specific amount from my address to this destination. That creates a transaction made up of data about the sender, receiver, and the amount being transferred. A digital signature is then required to prove that you own the coins you are trying to move. Once signed, your transaction is ready to be broadcasted to the network.
During this stage, your client will broadcast and propagate the previously constructed data to its peers – Bitcoin nodes. A node is a computer that verifies the transaction's authenticity and ensures that everything is ok with it. After the checks are done and no Bitcoin issues are found, the data is passed to new peers, where the legitimacy is tested again.
After the nodes have verified my transaction, is it now confirmed?
No, unfortunately not. Each Bitcoin node that receives a copy of your transaction places it in what we call the memory pool or simply the mempool. This area consists of valid transactions that are still unconfirmed. It’s important to highlight that there isn’t a central mempool. Each node has its own. The more copies there are of your transaction, the more visibility it will get.
So, what now?
Now it’s a waiting game. Your transaction has been broadcast and waits to get picked up and included in a block. Of course, you can always check its status by copy-pasting its hash into a block explorer, such as Blockchain, Blockstream, or Blockchair. At this stage, the service will show you that your transaction is still ‘unconfirmed’.
The last part of this process is having your value transfer confirmed on the blockchain. Miners pick up hundreds and thousands of transactions from their mempool to include them in a new Bitcoin block. A block is limited in space even with the fastest cryptocurrency asset, so if there are many unconfirmed transactions, they need a system to determine which will be selected first.
Because miners want to be paid for their work, they will pick those transactions that spend the highest mining fees. Thus, if they beat the competition and are rewarded with creating the next block, all the incorporated transactions will become confirmed and have 1 blockchain confirmation.
If your transfer is among those, you too will get your transaction confirmed. If not, a little patience is needed until the next block gets created, which solves your Bitcoin problems. Like we mentioned earlier, this takes on average 10 minutes. However, it does happen that we see two blocks mined in the space of a few minutes or that we have to wait for 40-60 minutes between new blocks.
What Can I Do to Speed Up the Transaction Confirmation?
As you have probably guessed by now, Bitcoin has a lot of competition to get your transactions confirmed due to the network’s limitations in terms of scalability. So, if you are unlucky or not careful enough, you might have to wait for days before your transfer gets confirmed. But luckily, it’s easy to learn how to give your transaction higher importance.
Paying higher network or mining fees is what will speed up Bitcoin transaction and give it a priority. This is especially important when the mempools are full, and you need a quick confirmation. The hard problems in cryptocurrency are that many wallets have poor algorithms and suggest low mining fees that place your transaction in an unfavorable position in the pecking order. In addition to that, even the fastest crypto transfer can’t beat Bitcoin’s 10-min block time interval.
Speaking about well-thought fee algorithms. ChangeNOW is launching NOW Wallet. It’s a mobile and non-custodial app, which will allow users to buy, sell, and manage their crypto. The wallet will have an in-built fee suggestion feature to allow users to manage the commissions appropriately.
So, before you send Bitcoin, take a look at the memory pool yourself to determine how much you need to pay in fees for a quick confirmation. Before we continue, please understand that your coins can’t be lost if not confirmed quickly. So, there is no need to panic. They will either reach the destination address or be dropped from the mempool and returned to your wallet.
How Do I Set Appropriate Fees to Avoid Bitcoin Problems?
There is an easy and advanced way to do it. More experienced users can manually check the mempool, inspect the number of unconfirmed transactions, look at the fee rates that other users are paying, and determine how much is needed.
The easier way is to go to Mempool.Space and check what are the recommended fees on the site.
At the moment of writing, Mempool.Space suggests three different fee rates depending on your needs. If you are in a hurry, it’s recommended you set your fees as shown under the ‘high priority' tab. If time is not of the essence, you can use the ‘medium’ or ‘low’ priority fees. Always keep in mind that the higher the commission, the greater the chance to get a next block confirmation.
How to Speed Up Bitcoin Transaction and Send It: Example
John wants to buy some Ethereum in exchange for Bitcoin on ChangeNOW. He logs into his Trust Wallet and initiates a new transaction. He enters the destination address and amount he wants to send – 1 Bitcoin. Before choosing the fees, John decides to take a look at Mempool.Space to ensure he sets an appropriate transaction fee.
It’s a bit time-sensitive, and John wants to get the Ether as soon as possible. So, he adjusts the fee according to the ‘high priority’ recommendation and broadcasts the transaction from his Trust Wallet. John was lucky because the next block was mined in just 8 minutes and the miners included his coins as well. The transfer is now confirmed, and very soon, ChangeNOW will send him his newly-purchased Ether.
Bitcoin isn’t the fastest cryptocurrency. Each digital asset has its own features, and one difference between cryptocurrencies lies in the block confirmation times. With Bitcoin, the average time is 10 minutes. That means that even with the highest possible fees, you still need to wait until the next block is mined.
Due to a limited Bitcoin transaction per second count, senders should pay close attention to the status of the mempool. To get the fastest crypto transfer, you need to set a high mining fee. Most of the Bitcoin problems involving unconfirmed transactions are solved with appropriate network fees. Before sending any coins, you can head over to Mempool.Space to get a complete overview of unconfirmed transactions and recommended rates. The site will help you to master one of the hard problems in cryptocurrency, which many beginners struggle with.