On-Chain and Transactions

Trading Tools: On-Chain and Transactions 🔗

The Story of Blockchain Highway

Imagine you want to send a birthday card to your friend who lives in another city. You put the card in an envelope, add a stamp (that’s your fee!), and drop it in the mailbox. The postal service picks it up, sorts it with other letters, and delivers it.

Blockchain transactions work the same way!

When you send cryptocurrency, your transaction travels on a digital highway. Let’s explore this highway together!

🔍 On-Chain Analysis Basics

What Is On-Chain?

Think of a blockchain like a giant public diary that everyone can read but nobody can erase.

“On-chain” means something is written in this diary. When you send Bitcoin or Ethereum, that transaction gets written down forever!

What Can You See On-Chain?

graph TD
    A["🔍 On-Chain Data"] --> B["💰 Wallet Balances"]
    A --> C["📤 Transactions"]
    A --> D["📊 Trading Activity"]
    A --> E["🏦 Exchange Flows"]

Simple Example:

• You can see that Wallet A sent 1 Bitcoin to Wallet B
• You can see how much money is in any wallet
• You can see when big investors are buying or selling

Real Life:

• It’s like being able to see everyone’s bank statements (but names are hidden)
• You see wallet addresses like “0x7a3b…” instead of names

Why Does This Matter?

On-chain analysis helps you:

• 🕵️ Spot where big money is moving
• 📈 Predict market trends
• 🔒 Verify transactions are real

🌐 Blockchain Explorers

What Is a Blockchain Explorer?

A blockchain explorer is like Google for cryptocurrency!

Just like you search Google to find websites, you use a blockchain explorer to find transactions, wallets, and blocks.

Popular Explorers

How to Use an Explorer

Step 1: Go to the explorer website Step 2: Paste a wallet address or transaction ID Step 3: See everything about it!

graph TD
    A["🔍 Search Box"] --> B["Enter Address"]
    B --> C["See Balance"]
    B --> D["See History"]
    B --> E["See Tokens"]

Example: If someone sends you crypto, they give you a “transaction hash” (a long code). Paste it into the explorer and you can watch your money travel through the blockchain!

💸 Transaction Fees

Why Do Transactions Cost Money?

Remember our postal mail example? You need to buy a stamp!

Transaction fees are your digital stamps. They pay the workers (called miners or validators) who process your transaction.

How Fees Work

Think of it like a tip at a restaurant:

• Small tip = slower service (your transaction waits longer)
• Big tip = faster service (processed quickly!)

graph TD
    A["You Send Crypto"] --> B{How Much Fee?}
    B -->|Low Fee| C["⏰ Slow Lane"]
    B -->|Medium Fee| D["🚗 Normal Lane"]
    B -->|High Fee| E["🚀 Fast Lane"]

Example:

• Sending $100 in Bitcoin might cost $1-5 in fees
• Sending $100 in Ethereum might cost $0.50-20 depending on traffic

Fee Formula (Simple Version)

Total Cost = Amount You Send + Transaction Fee

If you send 0.1 ETH and the fee is 0.005 ETH:

• Your friend receives: 0.1 ETH
• You pay: 0.105 ETH total

⛽ Gas Fees (Ethereum Special)

What Is Gas?

On Ethereum, we don’t just say “transaction fee.” We call it GAS!

Think of gas like fuel for a car:

• Your transaction is the car 🚗
• Gas is the fuel ⛽
• The blockchain is the road 🛣️

No gas = your car (transaction) doesn’t move!

Gas Has Two Parts

graph TD
    A["⛽ Gas Fee"] --> B["Gas Limit"]
    A --> C["Gas Price"]
    B --> D["How much work?"]
    C --> E["How busy is network?"]
    D --> F["Total Fee = Limit × Price"]
    E --> F

Simple Example

Sending ETH (simple):

• Gas Limit: 21,000 units
• Gas Price: 20 gwei (a tiny ETH unit)
• Total Fee: 21,000 × 20 = 420,000 gwei = ~$1

Using a DeFi App (complex):

• Gas Limit: 200,000 units (more work needed!)
• Gas Price: 20 gwei
• Total Fee: Much higher!

🚦 Network Congestion

What Is Network Congestion?

Imagine a highway during rush hour. Too many cars, everyone moves slowly!

The blockchain is the same. When too many people try to send transactions at once, the network gets crowded.

What Happens During Congestion?

graph TD
    A["📈 Many Users"] --> B["🚦 Congestion"]
    B --> C["⏰ Slower Transactions"]
    B --> D["💰 Higher Fees"]
    B --> E["😤 Frustrated Users"]

Real Examples

Pro Tip 🚀

Check gas trackers before sending:

• Low congestion = send now, save money!
• High congestion = wait if you can

📉 Slippage

What Is Slippage?

Imagine you see a toy for $10 in a store window. You run inside to buy it, but by the time you reach the counter, the price changed to $11!

That’s slippage. The price moved while you were trying to buy.

Why Does Slippage Happen?

graph TD
    A["You Click Buy"] --> B["Order Sent"]
    B --> C["Other Trades Happen"]
    C --> D["Price Changes"]
    D --> E["You Pay Different Price"]

Slippage Example

You want to buy 1 ETH at $2,000:

• Expected: Pay $2,000, get 1 ETH
• With 1% slippage: Pay up to $2,020, get 1 ETH
• With 5% slippage: Pay up to $2,100, get 1 ETH

Setting Slippage Tolerance

Most trading apps let you set how much slippage you accept:

Warning ⚠️: Too low slippage = transaction fails Warning ⚠️: Too high slippage = you might pay way more!

⏱️ Confirmation Times

What Is a Confirmation?

When you send a transaction, it doesn’t finish instantly. It needs to be confirmed by the network.

Think of it like getting approval stamps:

• 1 stamp = kinda safe
• 3 stamps = pretty safe
• 6 stamps = very safe!

How Long Do Confirmations Take?

graph TD
    A["📤 Transaction Sent"] --> B["⏳ Pending"]
    B --> C["✅ 1 Confirmation"]
    C --> D["✅✅ 2 Confirmations"]
    D --> E["✅✅✅ 3+ Confirmations"]
    E --> F["🎉 Fully Confirmed!"]

Why Wait for Multiple Confirmations?

More confirmations = more security!

Example:

• Buying coffee? 1 confirmation is fine
• Buying a car? Wait for 6+ confirmations
• Large exchange deposit? They might require 12-35 confirmations

What Affects Confirmation Time?

🎯 Putting It All Together

Let’s trace a real transaction from start to finish!

graph TD
    A["1️⃣ You Click Send"] --> B["2️⃣ Set Gas/Fee"]
    B --> C["3️⃣ Enter Network Queue"]
    C --> D{4️⃣ Congested?}
    D -->|Yes| E["Wait Longer ⏰"]
    D -->|No| F["Quick Processing"]
    E --> G["5️⃣ Miner Picks Up"]
    F --> G
    G --> H["6️⃣ Added to Block"]
    H --> I["7️⃣ First Confirmation ✅"]
    I --> J["8️⃣ More Confirmations"]
    J --> K["9️⃣ Transaction Complete! 🎉"]

Transaction Checklist

Before every trade, ask yourself:

• ✅ Gas/Fee: Is the fee reasonable for my urgency?
• ✅ Congestion: Is the network busy right now?
• ✅ Slippage: What’s my tolerance set to?
• ✅ Confirmations: How many do I need?

🎓 Key Takeaways

🚀 You Did It!

You now understand how transactions flow through the blockchain. From clicking “send” to seeing your crypto arrive, you know every step of the journey!

Remember: The blockchain is just a highway. Fees are your toll, gas is your fuel, and confirmations are your receipts. Simple as that! 🎉