This article focuses on discussing various ways of payment verification. let’s first start with the introduction of the basic terminologies that will be used in this article.
1. Authentication: Authentication refers to systems that authenticate users’ access to resources on the Bitcoin and other digital currency’s underlying technology.
2. Authorization: Before a transaction can be added to a block in the chain, it must first be authorized, or authorized, by the users.
3. Proof of Work: (PoW): In a blockchain network, (PoW) is the first consensus algorithm. It confirms the transaction and adds a new block to the chain of transactions. Proof of work generation can be a low-probability, random operation. Before a proper proof of work can be created, a lot of trial and error is necessary for this process. The basic operating premise of proof of work is a mathematical problem that may quickly demonstrate the existence of something.
Proof of work is required for security, fraud prevention, and trust-building. Independent data processors (miners) cannot mislead about a transaction because of its security. Proof of work is a technique for protecting Bitcoin’s transaction history while also making data changes more difficult over time.
4. Proof of Stake (PoS): According to the Proof of Stake principle, a person’s ability to mine or validate block transactions is proportional to the number of coins they own. This means that the more coins a miner possesses, the more mining power they have. To finish the verification step, nodes or miners must solve a computer challenge called the proof of work problem. One coin is awarded to the first miner who solves each block transaction issue. When a block of transactions is validated, it is added to the blockchain, which is a public, transparent database.
Simple Payment Verification
Simple Payment Verification (SPV) is a method that allows a lightweight client to check if a transaction is on the Bitcoin blockchain without having to download the entire blockchain. The block headers, which are significantly smaller than the full blocks, are all that the SPV client needs to download. An SPV client requests a Merkle branch as evidence of inclusion in order to verify that a transaction is included in a block. Compared to web wallets, SPV clients provide better security.
Key Features:
- It is simple and feasible to know the longest chain without becoming a miner.
- A user just needs to preserve a copy of the longest proof-of-work chain’s block headers and retrieve the Merkle branch that connects the transaction to the block it’s timestamped in.
- The user can’t check the transaction for himself, but he can see that it’s been approved by a network node by tying it to a point in the chain, and he can stop it.
- As a result, the verification is reliable as long as the network is controlled by honest nodes, but it becomes susceptible if an attacker gains control of the network.
- While network nodes may independently verify transactions, the simplified approach can be tricked by an attacker’s manufactured transactions for as long as the attacker can maintain network dominance.
- Accepting warnings from network nodes when they identify an incorrect block, forcing the user’s program to download the whole block and notified transactions to validate the discrepancy, is one way to defend against this.
Full Payment Verification
Payment verification in its entirety a full copy of the blockchain is required for wallets, often known as thick or heavyweight wallets. They may verify that bitcoins used in a transaction came from a mined block by scanning the blockchain backward, transaction by transaction until they find their source.
Key Features:
- These wallet applications are frequently active players in the Bitcoin network since they not only manage the user’s transactions but also verify and relay the transactions of other individuals. (Computers executing such applications are referred to as full nodes in these situations.)
- Full nodes are all Bitcoin miners (i.e., they need a complete copy of the blockchain to mine).
- In its fifth year, the blockchain had grown to over 15GB in size and included 35 million transactions (by its 10th birthday, it may likely be 100 times larger).
- A new complete payment verification system has been installed. The download of the complete blockchain via the Bitcoin wallet application might take several days (depending on bandwidth).
- Connecting to other full nodes and determining which blockchain has the highest proof-of-work total is required to obtain the blockchain (by definition, this is assumed to be the consensus blockchain).
Full vs Simple Payment Verification
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Full Payment Verification |
Simplified Payment Verification |
|---|---|
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Thick or heavyweight wallets, also known as full payment verification wallets, require a complete copy of the blockchain. |
Simple Payment Verification is a method that allows a lightweight client to check if a transaction is on the Bitcoin blockchain without having to download the entire blockchain. |
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Wallets run on high-end systems. |
Wallets run on low-end systems. |
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They can verify that bitcoins used in a transaction originated from a mined block by scanning backward, transaction by transaction, in the blockchain until their origin is found. |
An SPV client requests a Merkle branch as evidence of inclusion to ensure that a transaction is included in a block. |
| Running a complete payment verification wallet on laptops and other household devices may be inconvenient. | For laptops and other home devices, running a simplified payment verification wallet is convenient. |