Say if I was creating a new bitcoin website and I want to transfer some bitcoins from one of my own private wallets to another would that make it so the transaction would confirm almost instantly because it is a closed loop?
1 Answer
Yes you're talking about an off-chain solution. Exchanges use this solution.
It would be prohibitively expensive and impractical to transfer ownership on-chain for small amounts and/or frequent changes, so you send your coins to a single wallet owned by the exchange.
The exchange has their own system to keep track of who owns what. This system is private and not transparent, but fast and potentially free. Then when you choose to send it from the exchange to your wallet, a network fee is incurred at that point.
The off-chain solution could also be a blockchain solution, though not distributed as no one else would have any interest in maintaining your businesses ledger.
e.g. with coinbase.com
The Deposit:
Your wallet -> "your" coinbase wallet
occurs on main net blockchain
network fees incurred
technically deposited into a single main net wallet
wallet controlled by coinbase
you trust them with your coins at this point
Interwallet transfer on coinbase:
"your" coinbase wallet -> another wallet on coinbase of "your"s
occurs off the chain
as such it's free
as such is opaque
could be implemented however coinbase sees fit:
vb running in an excelsheet for all I know!
Withdrawal:
"your" coinbase wallet -> Your wallet
occurs on main net blockchain
coinbases single wallet is paying you
network fees incurred
grouped with other withdrawals for network fee efficiency
coins in your full control again
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So is there only one big network every website like coinbase.com and blockchain.info use. They don't have their own networks for internal bitcoin transactions where speed is a priority?– OllyCommented Sep 11, 2017 at 16:41
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Yes, they have their own. That's what I am saying "The exchange has their own system to keep track of who owns what."– westonCommented Sep 11, 2017 at 16:43
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but coinbase.com yes, blockchain.info no - that runs on-chain and is not an exchange.– westonCommented Sep 11, 2017 at 16:44
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And if I was running my version of coinbase where getting the bitcoin transaction confirmed from one of my own wallets to another one of my wallets in under 1 second is at the highest priority I could run my own network where internal transaction are confirmed in very little time?– OllyCommented Sep 11, 2017 at 16:52
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