You might have heard of the word “Blockchain” being thrown around recently unless you lived under a rock. It appears to be one of the year’s buzzwords. But it seems that many people don’t know what blockchain is or how it works.
- A node initiates a transaction by creating it first and then signing it digitally with its private key (created by cryptography). In a blockchain, a transaction can represent different actions. Most commonly, this is a data structure that represents value transfer across the blockchain network between users. Transaction data structure usually includes some value transfer logic, relevant rules, addresses of source and destination, and other validation information.
- A transaction is propagated (flooded) to peers who validate the transaction based on preset criteria by using a flooding protocol called the Gossip protocol. Usually, to verify the transaction, more than one node is required.
- It is included in a block once the transaction is validated, which is then propagated to the network. The transaction is considered to be confirmed at this point.
- Now the newly created block becomes part of the ledger, and the next block connects back to this block cryptographically. This link is a point of hash. The transaction will receive its second confirmation at this stage and the block will receive its first confirmation.
- Every time a new block is created, transactions are then reconfirmed. Usually, a network requires six confirmations to consider the final transaction.
- Every time a new block is created, transactions are then reconfirmed. Usually, six Bitcoin network confirmations are required to consider the final transaction.