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How Transactions Get Added to a Ledger: An Explanation of Ethereum
As a beginner in the world of cryptocurrency, it can be overwhelming to grasp the concepts behind blockchain technology and how transactions are executed. In this article, we’ll break down the process of how transactions get added to a ledger on the Ethereum network.
The Basics of Blockchain
Before we dive into the specifics of Ethereum’s transaction process, let’s quickly review what a blockchain is. A blockchain is a decentralized, digital ledger that records transactions across a network of computers (nodes). It’s essentially a chain of blocks, each containing a set of transactions.
Ethereum and Transactions
On the Ethereum network, transactions are recorded in a
blockchain called the « mainnet » or « Eth Blockchain. » Each block contains a list of transactions, which are verified by nodes on the network. When a new transaction is made, it’s added to the next available block in the chain.
The Transaction Process
Here’s how a single transaction gets added to an Ethereum ledger:
- Transaction Creation: Alice sends 1 Bitcoin to Bob’s public address. This is done using a cryptocurrency payment processor like Coinbase or BitPay.
- Transaction Verification
: The transaction is verified by nodes on the network, ensuring that it meets certain criteria (e.g., sufficient funds, proper cryptography). This process is called « mining. »
- Block Creation: A new block in the Eth Blockchain is created with a unique identifier (hash) and contains a list of transactions.
- Blockchain Update: The updated blockchain is broadcast to all nodes on the network for verification.
Miner Verification
Once a new block is added, it’s verified by specialized nodes called miners. Miners use powerful computers to solve complex mathematical problems, which involves finding a « hash » that corresponds to the previous block in the chain. This process is called
proof-of-work (PoW).
To create a valid transaction, Alice must:
- Have sufficient funds on her account.
- Be part of a group called a « committee » (more on this later).
- Complete a specific task or puzzle related to the cryptocurrency being used.
The Role of Committees and Decentralized Governance
Ethereum’s network is designed with committees, which are groups of nodes that work together to validate transactions and create new blocks. These committees have varying levels of authority, allowing for decentralized governance and security.
In summary, Ethereum’s transaction process involves:
- Transaction creation by Alice
- Verification by miners
- Block creation and addition to the mainnet
- Blockchain update and verification
The use of PoW ensures that only valid transactions can be added to the ledger, while the decentralized nature of the network allows for peer-to-peer transactions without intermediaries.
I hope this explanation helps you understand how transactions get added to an Ethereum ledger!