Gentle Introduction: Method of Cryptocurrencies Transactions

7 min readMay 24, 2021

Cryptocurrencies transactions are conducted in different ways; the common ways to transfer crypto assets or tokens are using wallet-to-wallet among two people or using third parties exchange platforms; transactions are also conducted via QR code or using crypto ATMs machine to convert crypto to traditional currency. Also, SMS Gateway is considered to be another alternative medium for crypto transactions especially for non-smart phone users. We classify several ways of authenticating cryptocurrencies transactions:

1. Transaction via Exchange Platforms: A cryptocurrency exchange, or a digital currency exchange (DCE), is a platform that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies. Exchange platforms are third parties that allow digital currencies users to trade their coins and earn some fee whenever a transaction is made. Also, these platforms serve as depositories to its members, who register can store their currencies in the platforms. Bitcoin or other tokens such as Ethereum users used these platforms to buy/sell and exchange bitcoins to other digital currencies or exchange bitcoin to fiat currencies such as Chinese Yuan, USD, andEuro etc. Exchanges may accept credit card payments, wire transfers or other forms of payment in exchange for digital currencies or cryptocurrencies. A cryptocurrency exchange can be a market maker that typically takes the bid–ask spreads as a transaction commission for its service or, as a matching platform, simply charges fees. Some brokerages which also focus on other assets such as stocks, like Robinhood and eToro, let users purchase but not withdraw cryptocurrencies to cryptocurrency wallets. Dedicated cryptocurrency exchanges Exchange platforms include the following Binance, Coinbase, Kraken, Bitfinex, Kucoin, OKEX and many others do allow cryptocurrency withdrawals, respectively.

2. Transaction via merchant’s protected website: This transaction is based on the own protected merchant’s websites like: Overstock,Dell, Namecheap, StarBucks, Lolli and other service providers such as Dish, Cheapair etc. Payers used bitcoin address place on the website to transfer some funds and then the payee who is owner of the merchant can redeem the bitcoin, this form of transaction is relatively safer compared to websites that are not protected.1.0.3 Transaction via unprotected websites or forums:Transaction based on the http security authentication transport layer protocol. Such as donation sites, blogs, chat forums, merchant’s sites etc. Social media some bitcoin users use social media platforms like Facebook, Twitter, Instagram etc. to make payment by simply clicking the URL link on the website. Attracting bitcoin and other crypto-tokens users to click via URL for payment posed a security challenge most of the links are not well secure with https. Attacker may use different techniques to trick users such as: Impersonate bitcoin brand in a social media, phishing bitcoin scam, bitcoinpyramid scam [4]

3. Transaction using QR code: Using QR code client can exchange Bitcoin face to face by simply scan QR code in a printed paper or website, this type of transaction mostly used by mobile clients [4]. QRcode encodes for varieties of error correction stage high, low and medium it contains label and massage parameters in order to keep QR code smoothly compatible with different mobile devices. Error correction code combined with checksum to QR code include checksum and Bitcoin address when QR code was generated with the correct address. For example Nano ledger is vulnerable to malware and MitM attacks [5].

4 Offline transaction using Bluetooth or NFC: Bitcoin can be transferred offline using Bluetooth or NFC, transaction offline is directly transmitted between payer and payee without need for internet connection. For example companies who provide such services are: Airbiz and bitcoin box. Table 1 below describe different categories of bitcoin transactions and some possible attacks.

5. Transaction via SMS gateway: Bitcoin and other cryptos clients send and receive cryptos by simply sending an (SMS)text. Clients can use SMS gateway wallet to send crypto by sending a text to the receiver’s phone number [4]. Therefore, the receiver redeems the coin via text message in her cell phone. This makes Bitcoin transactions simple for featured phones. For example coinbase is an exchange platform used by SMS gateway to allow bitcoin users to transfer BTC through SMS from mobile phone or using a web browser. Another example is37coin is a start-up company created to provide easy ways to send and receive BTC with your cell phone using SMS gateway features, it allows people who don’t have access to Smartphones to transfer digital currency like bitcoin efficiently.

CoinPip is a Singapore based start-up company that uses SMS-based functionality to simplify consumers to use bitcoin in a more convenient way. Coinapault is an SMSbased wallet designed to allow featured phone users to send and receive bitcoin. Unlike coinbase or blockchain, coinapault’s users are not required to register for an account inorder to redeem bitcoin, instead use coinapault’s SMS application to have access with the coin.

6. Transaction via Email: Bitcoin and other cryptos can be sent via email by simply typing the payee’s email together with the amount intended to be sent, once the transaction confirmed in the global ledger auto reply email is sent to the payee for the confirmation of the transaction.Tip Botis another bitcoin transaction platform that allows people to make bitcoin transactions through email.Blockchain wallet also has email embedded features to allow users to transfer bitcoin through email, before it was later removed from AppleIOS stores. However, this form of transaction is vulnerable to MitM attack and phishing attack. Similar to the personal email or mobile it can easily get compromised. In this case if the payer sends a BTC to a different email due to the nature of bitcoin transaction once confirmed cannot be cancelled or reversed by default transaction will automatically be sent back to the payer.

7. Bitcoin ATM Machines: allows people to exchange bitcoin to fiat currency or offer bidirectional services to buy/sell bitcoin or convert to traditional currencies. Some companies offer this form of services such as Radar, Robocoin, BTM, Genesiscoin, General bytes, lambassu, coinsource etc1. Since 2020, the number of new Bitcoin ATMs installed worldwide is nearing 10,000. According to the latest data from Coin ATM Radar, the current number of machines stands at 16,835, a strong %57.5 increase, or 9,683 new machines, as compared with 7,152 last year [1].

Figure 1: Top Crypto ATM Operators: coinatmradar [2]

8. Transaction via lightning network using Browser add-ons: The recent advancement of bitcoin and other cryptos transactions have given rise to using lightning network via software and browser plug-ins for efficient transactions.The purpose of lightning network is to solve the difficulty of scalability in the bitcoin network for faster transactions. Lightning network (LN) is essentially a type of bitcoin second layer payment channel that allows clients to send and receive payment on top of bitcoin network. This transaction is conducted off-chain, without broadcasting to the main blockchain network. With lightning network clients can send thousands of transactions per second with zero or less transaction fees, without compromising the decentralized nature of Bitcoin. Unlike traditional bitcoin payment, lightning payment channels use a multi-sig method that requires both parties to commit by signing transactions with private keys.

Recently a lot of companies and clients have started to use lighting networks to accept BTC payment instantaneously. Neutroni is a software program to integrate MsExcel plug-in for bitcoin transactions at the same time World Wide Web Consortium(W3C) announced to integrate Lightning Network-enabled Bitcoin (BTC) payments system to its APIs web browsers. Companies using lighting enable payment are: online gaming, coffee shops, restaurants etc. Moreover, in addition to that lightning network also allows clients who do not have access to full node Blockchain to make transactions in bitcoin use this form of payment channel to make transactions. However, lightning networks suffer from DDoS and wormhole attacks in which malicious intermediaries could steal fees from honest clients [6].


There are several claimed future benefits to using the Lightning Network compared to on-chain transactions:

  • Granularity: According to Andreas Antonopoulos, some implementations of the Lightning Network allow for payments that are smaller than a satoshi, the smallest unit on the base layer of bitcoin. Routing fees paid to intermediary nodes on the Lightning Network are frequently denominated in milli satoshis or msat.
  • Privacy: The details of individual lightning network payments are not publicly recorded on the blockchain. Lightning network payments may be routed through many sequential channels where each node operator will be able to see payments across their channels, but they will not be able to see the source nor destination of those funds if they are non-adjacent.
  • Speed: Settlement time for lightning network transactions is under a minute and can occur in milliseconds. Confirmation time on the bitcoin blockchain, for comparison, occurs every ten minutes, on average.
  • Transaction throughput: There are no fundamental limits to the amount of payments per second that can occur under the protocol. The amount of transactions are only limited by the capacity and speed of each node [3]

Table 1 describe bitcoin authentication via different platforms

Different platforms vary in terms of registration requirements to verify users. In this case, most of the platforms use methods like mobile phone verification text message(2FA) and finger-print patterns to authenticate users.


[1] The number of bitcoin atms in the us rose 177% over the past year. Accessed: 2021–04–24.

[2] Top crypto atm operators. 2021–04–26.

[3] Andreas Antonopoulos.Mastering Bitcoin (2nd ed.).O’Reilly Media, Inc.,London, 2017.

[4] Abba Garba, Zhi Guan, Anran Li, and Zhong Chen. Analysis of man-in-the-middle of attack on bitcoin address. InProceedings of the 15th InternationalJoint Conference on e-Business and Telecommunications, ICETE 2018 — Volume2: SECRYPT, Porto, Portugal, July 26–28, 2018., pages 554–561, 2018.

[5] Colin LeMahieu. Nano: A feeless distributed cryptocurrency network.Nano[Online resource]. URL: https://nano. org/en/whitepaper (date of access: 24.03.2018), 2018.

[6] Giulio Malavolta, Pedro Moreno-Sanchez, Clara Schneidewind, Aniket Kate, andMatteo Maffei. Multi-hop locks for secure, privacy-preserving and interoperablepayment-channel networks.