How Do Blockchain Transactions Work?
Before discussing how blockchain transactions work, let’s first take a closer look at what exactly is blockchain.
What is Blockchain?
Generally speaking, blockchain refers to the record-keeping technology working behind the Bitcoin network. It is a decentralized, distributed, and shared public ledger on which the whole system depends.
This Distributed Ledger Technology (DLT) enables data storage on various servers globally. This technology allows everyone on the network to see entries of others in real-time.
As the name suggests, blockchain is made up of blocks that are digital pieces of information. Similarly, transaction refers to the transfer of value between Bitcoin wallets that are involved in blockchain.
Wallets entail a secret part of the information that is called a private key. It is a string of letters and numbers such as 18c177926650e55509, which appears in different blocks when transactions occur in the network. This key is utilized for signing Bitcoin transactions as a mathematical proof that this transaction comes from its owner.
All of the Bitcoin transactions are public and confirmed within 10 to 20 minutes via the mining process.
It is a set of specific numbers and letters produced by the hash function. It is a mathematical function that converts a different number of characters into a string having a fixed number of characters.
This refers to the one-time code that is added after each record. This code is sent to the client by the server. A user adds this code to the password before encryption.
Nodes that are the computers can approve the transactions that occur in the network. After checking the validity of the transaction, it is written into blocks.
These are the pieces of digital information that contain information about transactions such as amount, time, digital signatures of users. Of note, each block has a specific code, called Hash.
Miners create new blocks via mining. This process entails specific software for solving complex mathematical problems to generate a hash.
Mining refers to the process in which transaction records are added to a public ledger called a blockchain. It is a distributed consensus system that confirms the awaiting transactions by incorporating them in the blockchain. Miners are nodes who create blocks after solving a proof of work algorithm. Miner is rewarded with coins once the block produced by the miner gets approval.
Besides, this process implements a chronological order in the entire blockchain and protects the neutrality of the network. For transactions to get confirmed, it should be packed in a block that strictly complies with cryptographic rules. Since the blockchain database is not stored in any one location, its records are public and verified quickly.
Pillars of Blockchain Technology
It is decentralized and can not be controlled by any third party. It allows only you to remain in charge of your money. Besides, everyone involved in a network can access the transaction history and confirm transactions.
It refers to the inability to modify or change something in the blockchain network over time.
Blockchain is transparent in the sense that it allows users access to transactions. However, the personal identity of users remains secured and hidden through complex cryptography.
It allows users to transfer the ownership of digital assets securely with the use of public-key encryption as well as proof of work methods.
Blockchain technology enables digital information to be distributed and recorded securely. It will be difficult for some people to understand this concept as they cannot see technology in action. However, blockchain technology has been adopted across various industries for transaction purposes. Besides, many sectors are striving to take blockchain to ensure secure transactions. Now you know how blockchain transactions work; you can invest in cryptocurrencies that operate on blockchain technology.