Understanding Blockchain and how transactions work

#Day3 – #30daysofWeb3 Learning Challenge

Understanding Blockchain and How Transactions work

#1 What is a Blockchain?

 ‘A blockchain is a linked list of transactions stored on a network of computers” A shared immutable ledger, if you will.

#2 What are the defining properties of a Blockchain?

They are ‘Decentralized’ (transactions happen on a network of computers called nodes without a central authority)

They are ‘Immutable’ ( transactions are permanent records – cannot be changed once committed)

They are ‘Open’ (transactions on a blockchain can be viewed by anyone

#3 How does a Blockchain look?

Think of each block holding a list of transactions, an hash (string of random characters definign the block) and the previous block’s hash

#4 What is required for a transaction to happen?

If Alice wants to send Bob 1 bitcoin then here is what needs to happen

Both need crypto wallets that story two keys – A public key and a private key

Think of a public key as an address that lets you send and receive transactions. Example – your email id

Think of private key as what proves that you own the tokens associated with the public address. Say – the email password. This is a ‘seed phrase’ and unique and confidential to you

#5 What are the steps that happen during a transaction?

a. Alice sending Bob a bitcoin goes through three steps

b. Alice tells the wallet Bob tells his wallet: “I want to send 1 bitcoin from my public address to Bob’s public address.” She signs this transaction based on his private key proving her ownership..

Alice’s wallet sends the transaction to nodes on the blockchain. These nodes then verify the transaction using Alice’s signature and public key.

c. A node groups Alice’s transaction with other transactions into a block. It then works with other nodes to add the block to the blockchain.

Only if other nodes agree will the block be added to the blockchain

This requires consensus.

So how does a blockchain process transaction without middlemen?

We will look in more detail into the two consensus mechanisms tomorrow

For Sources/if you missed Day 1 or 2, check out the series in the link below

Follow along if you are keen to join me on this journey.

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Ranjani Mani

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