How does a blockchain transaction work?
The process behind a transfer is more complex than it might appear
The request ➡️
A user in the blockchain requests a transaction to be made.
Mining machine ➡️
Some of the machines on the network might be ‘mining’ machines and can, therefore, work on the transaction to earn cryptocurrency.
The network ➡️
The request is sent out to a peer-to-peer network of computers. Each computer is known as a ‘node’.
When the network nodes have checked the user’s status they’ll validate the transaction.
Transaction complete ➡️
All of this happens in a few seconds. Moments later, the original user is notified that the transaction is complete.
In the chain ➡️
The block is added to the rest of the chain in a permanent form that can’t be edited.
The header ➡️
The new block contains a ‘header’, which is a small piece of information from the previous block in the chain.
Create a block!
The information that is being transferred is combined with the verification information to create a new block of data.
Hey big sender!
Could blockchain make the world go round?
The pros of blockchain
👍Secure transfers: It’s a safe and confidential way to transfer data that can’t be edited.
👍Irreversible transactions: Transfers are safer because a buyer can’t take information then claim back the money.
👍The potential: Blockchain technology could make it easier for us to pay for things, access our medical records and even vote.
👍Cryptocurrencies can’t be frozen: If there’s a financial crisis, banks often freeze bank accounts. That can’t happen with cryptocurrencies.
The cons of blockchain
👎Hacks still happen: Some system hacks can still cause major problems, such as an attack that blocks a node from accessing the network.
👎Irreversible transactions!: When mistakes are made it can be more difficult to organise refunds or redistribution.
👎No regulators: Because Bitcoin is digital it has no official regulator. If the creator decided to split it, or change it, it could have major effects.
👎New tech can scare people: People don’t really understand blockchain or cryptocurrency, so making them mainstream will be
This article was originally published in How It Works issue 117, written by Stephen Ashby
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