How are transactions verified on a blockchain?


by mandy , in category: Cryptocurrencies , a year ago

How are transactions verified on a blockchain?

Facebook Twitter LinkedIn Telegram Whatsapp

1 answer

by matteo.zboncak , a year ago


Transactions are verified on a blockchain through a process called consensus. Consensus mechanisms ensure that all participants in the blockchain network agree on the validity of a transaction before it is added to the blockchain. The most common consensus mechanisms used in blockchain networks are:

  1. Proof of Work (PoW): This is the mechanism used by cryptocurrencies like Bitcoin. Miners compete to solve complex mathematical puzzles, and the first to solve the puzzle gets to add the next block of transactions to the blockchain. Once a block is added, it is difficult to alter the transaction history, providing a high level of security.
  2. Proof of Stake (PoS): In this mechanism, participants hold and "stake" a certain number of tokens in the network. The probability of validating a block and earning rewards is proportional to their stake. PoS requires less computational power compared to PoW, and it is considered more energy-efficient.
  3. Delegated Proof of Stake (DPoS): DPoS is a variation of PoS where participants vote for a set of block producers who are responsible for validating transactions and adding them to the blockchain. These block producers take turns to create blocks, reducing the time taken to validate transactions, resulting in faster transactions.
  4. Byzantine Fault Tolerance (BFT): BFT-based consensus mechanisms aim to achieve consensus in a network where some participants may act dishonestly or fail. These mechanisms ensure that the network remains secure and transactions are verified even in the presence of malicious participants.

Once a transaction is deemed valid by the consensus mechanism, it is added to a block and then linked to the previous blocks in a chain-like structure. This makes altering historical transactions extremely difficult, ensuring the immutability and security of the blockchain.