Cryptocurrency transactions are quite like that of physical or fiat currency. It is the act of transferring one piece of information from one person to another. In one case, a physical paper or coin currency is transferred from one person to another in exchange for services or goods based on the value of that currency placed on it by a centralized regulatory authority. In the other case, it is a virtual piece of electronic information, similarly transferred from one person to another for goods or services; however, there is no central authority placing value on the cryptocurrency, as the value is determined by the users (owners) rather than a government entity, but with checks and balances in place to ensure legitimate transactions.
In either case, verification of the transaction is important.
With modern currency, in this instance, a check, credit, or debit card, a handwritten signature serves as verification that the occurrence owner agrees with and approves the transaction. Similarly, the lawful owner of cryptocurrency must have a way to agree to release their funds to another party of their choosing. This is done by creating a digital signature and serves the same purpose as a handwritten signature – “identifying an account, stating the agreement of its owner with the content of specific transaction data, and approving its execution by allowing the data to be added to the history of transaction data.” (Drescher, 2017)
A benefit of cryptocurrency is that it is a currency without borders, meaning that the currency does not lose or gain value if it is used outside of your home country. At the time of writing, one U.S. Dollar (USD) is valued at €0.85 (EUR) and £0.76 (GBP). So, let’s say that you were planning a trip to Germany, and before you left the United States, you converted $100 into Euro. When you handed the Currency Exchange representative your $100 at the airport, they would hand you back a mere €85.41. Visiting England? You’d leave the airport with £76.76. You can use XE.com to determine what your currency is worth compared to other currencies around the world. With cryptocurrency, one Bitcoin in the US is worth one Bitcoin in England, Germany, Pakistan, Nigeria, etc., with no need to worry about conversion rates.
Because transactions are a basic entity on top of which the bitcoin blockchain is constructed. Transactions are the result of a brilliant collision of cryptography, data structures, and simple non-turing-complete scripting. They’re simple enough that common transaction types aren’t overly complex but flexible enough to allow developers to encode fairly customized transactions types as well. Today we’ll take a tour of the former.
As an investigator, how does your bitcoin subject post a new transaction to the network (and what happens when it’s received)?
What exactly is happening when they send some bitcoin to another subject or person of interest?