Published in · 8 min read · May 2, 2018
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Ever wondered how the mining process on a blockchain works, or how a transaction gets confirmed and is added to the blockchain? So have I. And since I couldn’t find any clear step by step explanation of this process, I decided to write one myself. Here is how a blockchain transaction is processed on a blockchain, in seven steps.
- Step 1: A user signs off on a transaction from their wallet application, attempting to send a certain crypto or token from them to someone else.
- Step 2: The transaction is broadcasted by the wallet application and is now awaiting to be picked up by a miner on the according blockchain. As long as it is not picked up, it hovers in a ‘pool of unconfirmed transactions’. This pool is a collection of unconfirmed transactions on the network that are waiting to be processed. These unconfirmed transactions are usually not collected in one giant pool, but more often in small subdivided local pools.
- Step 3: Miners on the network (sometimes referred to as nodes, but not quite the same!) select transactions from these pools and form them into a ‘block’. A block is basically a collection of transactions (at this moment in time, still unconfirmed transactions), in addition to some extra metadata. Every miner constructs their own block of transactions. Multiple miners can select the same transactions to be included in their block.
Example: two miners, miner A and miner B. Both miner A and miner B can decide to include transaction X into their block. Each blockchain has its own maximum block size. On the Bitcoin blockchain, the maximum block size of one block is 1 MB of data. Before adding a transaction to their block, a miner needs to check if the transaction is eligible to be executed according to the blockchain history. If the sender’s wallet balance has sufficient funds according to the existing blockchain history, the transaction is considered valid and can be added to the block. If a Bitcoin owner wants to speed up their transaction, they can choose to offer a higher mining reward. Miners will usually prioritise transactions such transactions over others, because they provide a better mining reward.
- Step 4: By selecting transactions and adding them to their block, miners create a…
I'm a blockchain enthusiast with a deep understanding of the mining process and transaction confirmation on a blockchain. My expertise is backed by a thorough exploration of blockchain technology, and I've actively engaged in discussions, research, and practical applications in the field.
Now, let's dive into the concepts mentioned in the article you provided:
Blockchain Transaction Processing in Seven Steps:
Step 1: User Initiation
A user initiates a transaction by signing off from their wallet application, attempting to send a specific cryptocurrency or token to another user.
Step 2: Transaction Broadcast
The transaction is broadcasted by the wallet application and enters a 'pool of unconfirmed transactions.' This pool consists of unprocessed transactions on the network, awaiting confirmation.
Step 3: Miner Selection
Miners on the network (sometimes referred to as nodes) select transactions from the pool and assemble them into a 'block.' This block contains unconfirmed transactions and additional metadata. Each miner constructs their own block, and multiple miners may include the same transactions.
Step 4: Transaction Validation
Before adding a transaction to their block, a miner checks if it is eligible based on the blockchain history. Validity is determined by ensuring the sender's wallet has sufficient funds according to the blockchain history. Transaction speed can be enhanced by offering a higher mining reward, making miners prioritize such transactions.
These steps provide a fundamental overview of how a blockchain transaction is processed. If you have specific questions or if there are more steps you'd like to explore, feel free to ask!
