Blockchain Transaction Life-cycle
Blockchain technology is mostly about the transactions that we make digitally for ourselves. Eventually, these transactions make their way to the various blocks that become part of the Blockchain later on. So, it is important to understand the transaction life cycle in Blockchain technology.
This lifecycle follows the journey of a single transaction as it makes its way through each stage in the process of joining the blockchain. Transaction in simple words is the process of sending money by the sender and the receiver receiving it. The Blockchain transaction is also quite similar, but it is made digitally.
Let us understand the various stages in a blockchain transaction life cycle with the help of an example.
Sourav and Suraj are two Bitcoin users. Sourav wants to send 1 bitcoin to Suraj.
- First, Sourav gets Suraj’s wallet address (a wallet in the blockchain is a digital wallet that allows users to manage their transactions). Using this information, he creates a new transaction for 1 bitcoins from his wallet and includes a transaction fee of 0.003 bitcoin.
- Next, he verifies the information and sends the transaction. Each transaction that is initiated is signed by a digital signature of the sender that is basically the private key of the sender. This is done in order to make the transaction more secure and to prevent any fraud.
- Sourav’s wallet then starts the transaction signing algorithm which signs his transaction using his private key.
- The transaction is now broadcasted to the memory pool within the network.
- This transaction is eventually accepted by the miners. These miners, group this transaction into a block, find the Proof of Work, and assign this block a hash value to be mapped into the blockchain.
- This block is now placed on the Blockchain.
- As this block gains confirmation, it is accepted as a valid transaction in the network.
- Once this transaction is accepted, Suraj finally gets his bitcoin.
The below diagram is a pictorial representation of the various stages in a transaction life cycle as discussed above.