To understand Transactions in Blockchain, we look into,
- Transactions in Blockchain – Basic Outline.
- How exactly is Transactions in Blockchain carried out?
- Transactions in Blockchain – Block Creation.
- Initiating a New Transaction.
In the previous session, we discussed in brief the components that are involved in any Blockchain Technology along with how these components shape the architecture of the Technology. Today, we look into the more complex details of the transaction and the role of each element in it.
Transactions in Blockchain – Basic Outline
As we know by now that a cryptocurrency Is not something that has a physical presence like hard currency. However, the best part of Crypto is, there is no such soft currency as well that can be stored into any electronic storage device like any file or storage area.
How exactly is Transactions in Blockchain carried out?
Considering Bitcoins, it is neither a hard nor soft currency, but a series of transactions that are executed through the network and recorded in a distributed ledger. Hence, if an individual claim to have 10 Bitcoins, it can be proved through the transactions that happened and are stored inside the ledger reflecting the transactions done by the individual to purchase those 10 Bitcoins. In other words, a cryptocurrency is just a transaction record that is stored in the distributed ledger of a Blockchain.
Transactions in Blockchain – Block Creation
In order to facilitate Transactions in Blockchain, the very first step would be to create the Block. Even though, till now, we have discussed the presence of a Ledger, that makes up the Blocks, but it’s not just the Ledger that is present in the Blocks. A Block also includes headers and footers that contain a few details pertaining to the encryption details. The transactions in the block are also compressed and encoded to ensure the security of the transaction.
The ledger will also remain in the block and can be referred to as and when needed, especially while creating further Blocks.
Initiating a New Transaction
Since Blockchain currencies are nothing more than a series of transactions, the first step to verify a transaction is to look at where the sender says they originally got their money. The verifier will then review the history of the Blockchain to find the block and transaction where the sender received the money. If that input transaction is confirmed on the Blockchain, then the transaction is valid, and they will need to confirm the receiving party’s address.
If the input transaction hasn’t been confirmed, then the current transaction is invalid, and it won’t be included in the ledger. Once all the transactions in that block have been verified, it’s time to create the ledger.
In the next session, we deal with further details of a transaction and how exactly the records are stored and retrieved.
Suggested Blockchain Topic
Different Components of the Blockchain Technology and roles - Session 5
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