What is a Transaction: Everything You Need to Know

What is a Transaction: Everything You Need to Know

Every time someone sends or receives tokens, or cryptocurrencies, a transaction takes place between two participants. Thus, the transaction allows people to send and receive tokens.

Cryptocurrencies require the recipient to have a wallet, as the tokens the sender has are stored.

Transactions Stored in a Decentralized Way

Each transaction contains information about the origin of the amount sent. This creates complete documentation of where tokens come from.

This documentation is extremely important as it does not allow invalid transactions to be added to the blockchain.

Since cryptocurrency transactions can always be tracked, it's easy to verify that a transaction is legitimate.

Transaction Validation By Network

In the case of cryptocurrencies, the transaction is validated through other network participants.

Depending on the currency, different consensus models are used to test the validity of a transaction.

Basically, it's just important that most participants classify the transaction as valid. Invalid transactions can be rejected and discarded.

Bitcoin Transaction: Key Steps to Know

Bitcoin is one of the most popular cryptocurrencies, which uses a blockchain to document transactions.

Multiple transactions are combined into a block and added to the blockchain — this is how transactions are documented. Each block can contain a different number of transactions.

In the case of Bitcoin, the exact amount depends on the block size specified by a platform.

If person A wants to send bitcoins to person B, this transaction contains three essential pieces of information:

  • The sender address of person A's wallet, so you can track where the sent bitcoins come from ('Incoming');
  • The number of bitcoins person A wants to send to person B;
  • The address of the wallet recipient Bitcoin of person B ('Exit').

A transaction also contains some additional information, such as information about a transaction fee or a hash of the previous transaction. Transactions of others criptomoedas they are similarly structured and generally differ only in details.

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