Are you interested in knowing how ledger tracks all transactions that occur in the blockchain? How does blockchain record every transaction? If yes, you’ve come to the right spot.
Are Blockchain an emerging future of technology? It could alter the way we work by providing a decentralized-ledger system.
The transformational aspect of what makes blockchain the buzzword. How do these come into question?
What is the Blockchain?
At its core, blockchain is simply a huge automatized, decentralized ledger (or database). The principal purpose behind cryptocurrency is to develop the first digital currency that can facilitate peers-to-peer (P2P) transactions with no third-party involvement.
The blockchain allows for the secure transfer of goods such as money and property, contracts and more, without the need for an intermediary from a third party like banks or the government. Learn more information in the Ledger Academy article Blockchain Basics.
What is a Transaction on the Blockchain?
A transaction is the transfer of value through the blockchain. In simple words, a transaction occurs the act of giving the amount of their cryptocurrency to another.
For transactions to be made using the blockchain you require to have a wallet or a program connected to the blockchain, which you are the only one with access. It keeps track of the cryptocurrency you have and lets you transact through it.
Every wallet is secured through a specific cryptographic process which makes use of a unique pair of distinct, but linked keys: a public and a private. public key.
Public keys, sometimes referred to as an address is the sequence of numbers and letters that the user has to share to get money.
A private key should be kept private, just as your bank card pin number, since it allows the use of any money that is obtained by the associated public key.
Through their digital wallets, users (whoever is able to access their secret key) is able to authorize or sign transactions , and thus transfer value to the new owner. The transaction is then transmitted to the network and added to the blockchain.
How Blockchain Works
With an understanding of the blockchain records is, we’re now ready to comprehend how blockchain functions.
A transactions occurs whenever one peer transfers the information, or even money, to another. When it happens the block is informed regarding the exchange. This is similar to how you perform online transactions.
If you purchase something on the internet both the platform and bank are informed about it. Both stores the relevant details about the transaction. Additionally, the blockchain network is able to monitor hundreds and thousands of transactions taking place simultaneously at any one moment.
In the event of blockchain, transactions have to be confirmed. Similar to checks performed by the bank and eCommerce platform when you purchase. But, there’s a major difference.
The main difference is that there’s no central authority that is in charge of the transactions. In order to manage transactions, the consensus method is employed.
The information about transactions is checked through the method. Participation of peers is vital to making the consensus method effective. However, all peers do not have to be involved in bringing the consensus method work.
In step 3 the transaction is recorded inside the block. This is only done when the transaction has been confirmed. If the transaction was not verified, then it won’t be included in the block.
This could be similar to the process your transaction is verified once you verify your transaction with the one-time password. For blockchain transactions this verification takes place by using consensus algorithms. After the verification is completed the transaction is saved within the blockchain.
In the final step the block now is unique in its hash value. The value of the last block’s hash is used to create the hash code unique to it. This is how you can create an orderly chain.
This value of the hash is confirmed and then compared with other blocks on the chain to determine if it is a an element of chain.
Additionally, the amount of hash is calculated by transactions stored within the block. This is why it is the only code that can’t be discovered or replicated using any other computer process or algorithm.
What records all the transactions in a blockchain?
To address this issue we’ll introduce a new word referred to by the name of ” ledger.”
Ledger is a type of computer file or a book of principal that records all the details of transactions within an organization, company or network.
The idea behind the ledger isn’t a new concept. It’s been in use since the beginning of trade. Ledgers first were discovered in Mesopotamia city around 7000 years ago and is now referred to as Iraq. Fascinating right?
The ledgers were kept close by so that they would know when the transactions took place.
The story of ledgers’ history is another fascinating topic. Presently, there are modern ledgers, and computers are capable of managing and recording intricate ledgers.
Blockchain also has changed the way ledgers operate. Thanks to it, we now have a decentralized and distributed ledger. Additionally, since it isn’t a central source of authority, verification is performed by using consensus algorithms.
What is a Blockchain Ledger?
Blockchain ledger is an decentralized ledger that manages and stores the transactions. It is clearly distributed and decentralized , which is what makes it a fascinating alternative other traditional leadger systems.
Because there isn’t any central authority it is distributed by the nature of. When it is an publicly-owned blockchain every computer in the world has an exact copy of the ledger. They may have the complete duplicate of the ledger or the required components that allow them to be part of the network.
The ledger changes constantly by the addition of new transactions. Thus, each time there is a new transaction the ledger is constantly updated.
How does a ledger act in a private/permissioned network?
There are many kinds of blockchain networks. One type that we’ll be discussing are the permitted network. It is a closed network, where only a select group of participants are able to participate.
Therefore, if a business decides to establish an authorized network, it can invite selected individuals to join it. Everyone involved must undergo the Know Your Customer(KYC) procedure.
However, the main issue is whether the weather ledger functions similarly to a permissioned system?
So, the answer is, partially yes.
The sole difference is the selection of the people who can be part of the group. Another common feature in the permissioned network is the selection of computers that are pre-selected for the process of validation of transactions.
Through a permissioned network companies can take advantage of its speed, efficiency and performance it offers.
The Permissioned Network allows the business to modify the network settings in line with their specific requirements.
Blockchain Transaction Life Cycle
While we’ve discussed this subject in a few pieces in the previous section It is best to get a complete understanding of what’s available in the entire blockchain transaction’s life cycle.
Generally speaking, a life cycle of a transaction comprises the following six steps.
- A node within the network sends the transaction request. The node can use an decentralized application or wallet.
- The broadcast messages are broadcast to the network.
- The computers begin verifying the transaction using their verification rules(consensus algorithm) which are unique to the blockchain network.
- The transaction now has an exclusive hash value.
- The verified block has been included in the Blockchain.
- The blockchain transaction is complete.
It’s easy to say the Blockchain technology is changing every single day. There are many other projects I did not mention in my article. Hyperledger is one of them. is using its own approach to address the issue of distributed ledger technology for businesses.