How Blockchain Works ?
The basic working of blockchain in the following steps to add validated transactions to the blockchain.
Last updated
The basic working of blockchain in the following steps to add validated transactions to the blockchain.
Last updated
Step 1- We can understand the working of blockchain, considering an example of a transaction in which user A wants to transfer some money into user B’s account.
Step 2- Before sending the money to the receiver, the transaction needs to be authenticated using digital signature and encryption techniques using the sender’s private key.
Step 3- Then, the authenticated transaction with the transaction fee is broadcast to all the other nodes of the P2P network.
Step 4- After that, these transactions should be verified by all the nodes in the network, which is known as the mining mechanism.
Step 5- Miners in the network compete to solve a complex mathematical puzzle. The miner who solves that puzzle first can validate the transaction, and in return, they get the transaction fee as a reward.
Step 6- Once a transaction is verified, all the participants of the network have to come to an agreement regarding which block to append to the network. This is where the consensus algorithm can be utilized. A consensus algorithm ensures that all the users in the network are on the same stage, meaning that they all agree on which block to pick up next as the miners create many blocks.
Step 7- When the blockchain accepts the block added to the network, it confirms that the block is verified, and user B receives the money sent by user A securely.
The process of a blockchain transaction, such as transferring money from user A to user B, involves several crucial steps to ensure security and integrity. Initially, the transaction is authenticated using digital signatures and encryption with the sender’s private key. It is then broadcast to all nodes in the peer-to-peer network. These transactions are verified through a mining mechanism, where miners solve complex puzzles to validate the transaction and receive rewards. Once validated, a consensus algorithm is employed to ensure all network participants agree on the block to be appended to the blockchain. Upon successful consensus and addition of the block, the transaction is confirmed, and user B securely receives the money from user A. This process highlights the comprehensive and secure nature of blockchain technology in managing and validating transactions.
