Funds Transfer

[Adarsh]

I am trying to understand Bit Coin and Block Chain Technology for funds transfer. I have following questions:

1. As in the case of traditional method of electronic funds transfer there are banks involved and we can actually link the accounting entries for the banks.
In the case of BitCoin where in lets say person A wants to transfer funds to Person B, where are the accounting entries recorded for the transaction??

2. According to the following link : [Spam link removed. Please don't do that] Here the rates for 1 bitcoin have defined as per the currency. eg. 1 bitcoin = 380 US $. Now lets say if I have to transfer 100 US$, so can I transfer 100 US $? Because what I understand is transaction are done in terms of 1 bit coin only. Kindly please elaborate on the bit coin aspect in terms of higher amounts for transfer and lesser amount for transfer?

3. I want to understand the entire flow for transfer of funds, if someone can break it down in steps that would be really very helpful.

Would Really appreciate your time and help for the same. Thanks.

Edit: Post edited to remove advertisement/spam. - Admin

 

[Bagatell]

@Adarsh

1. Transactions are stored on the blockchain e.g. https://blockchain.info/tx/63b47a4d0232ecc6542688536e09dbaff95bd5c5d33162f46bc86f400e595265

2. "1 bitcoin only"? Transactions can be for any amount or fraction of a bitcoin. If you need to send $100 worth you will need to agree the exchange rate first. The fee for a simple transaction will be the same for $1,000,000 as for $100.

3. The transaction flow is from your wallet to the vendors wallet via the block chain.

More info here - https://bitcoin.org/en/faq#transactions

 

[YarkoL]

@Adarsh

The wallet is basically a collection of private keys. Private keys correspond to public keys. There is no feasible way to figure out a private key from the public key. But it is easy to verify that a message (such as transaction) has been signed with a private key corresponding to a given public key.

Addresses are just public keys encoded to compact, readable strings.

When you send N coins of bitcoin from address A, there are no actual coins rolling down the wire. Instead you announce to the network a message that says:
"I've had at my disposal N coins in address A, and they are now at the disposal of the owner of the address B"
Going a little deeper, the message actually says something like

"My public key A holds N coins (see ledger entry #XXX), and here is a signature made with private key corresponding to public key A to prove that I am the rightful owner of this amount. From now on, public key B holds these N coins, and can spend them with a signature made with private key corresponding to public key B"

Now when the other nodes in the network receive that message, they verify it. They each keep a copy of the ledger (a data store called blockchain) and looking up Entry #XXX they see that it says something like

"Entry #XXX : My public key C holds N coins (see ledger entry #YYY), and here is a signature made with private key corresponding to public key C to prove that I am the rightful owner of this amount. From now on, public key A holds these N coins, and can spend them with a signature made with private key corresponding to public key A"
Now the nodes know that the entry that the transaction refers to is valid.

Next they check that the provided signature corresponds to public key A. If it does, they know that the new transaction is valid, and they continue to propagate it further, until it spreads through the entire network.

Finally it arrives to a special node called a generator or, more colloquially, a "mining" node that adds it to the ledger as Entry #ZZZ and using a math technique called proof-of-work "stamps" it as a forever valid entry in the blockchain. The generator node then transmits to all other nodes that entry, together with a collection of other entries that it has been working on, in a data structure called "block". The other nodes validate the block (by checking its proof-of-work) and update their copy of blockchain (the ledger).

Hope this helps...

 

[Bagatell]

@YarkoL Helped me. Thanks!

 

[yrral86]

I would also add that you can have multiple input addresses and multiple destination addresses. So you usually send more than you need (because you don't have exactly the right amount in one address), and then you send yourself back some change. However, this is all handled automatically by your wallet software. It will usually just show you your balance and let you send exactly how much you want with all the details handled automatically.

 

[Adarsh]

Thanks a lot everyone, Appreciated.