Cryptocurrency creates a new era of currency and transactions. It is a form of a digital asset that is based on an encrypted network. Cryptocurrency transaction is considered one of the most secure ways of transaction. But have you wondered ‘How is a transaction verified on a cryptocurrency network?’. So, let’s learn the process of transaction verification on a cryptocurrency network and the work of a crypto-miner in this crypto transaction verification process, in this article…
What Is Cryptocurrency?
Before learning the answer to ‘How is a transaction verified on a cryptocurrency network?’, you need to understand what a cryptocurrency is. So, cryptocurrency is a digital currency based on blockchain technology and stored in digital wallets with a public ledger record.
The term cryptocurrency refers to the advanced encoding and encryption used to verify a peer-to-peer (P2P) currency transaction. This method allows users to control their money and transactions without depending on central authorities, banks, or other third-party interference.
Which event triggers the invention of cryptocurrency? The answer to this question is very interesting. In 2008, when the global financial crisis occurred, Satoshi Nakamoto pursued the idea that people could control their money without relying on any third party.
How Is A Transaction Verified On A Cryptocurrency Network?
If you are wondering, how is a transaction verified on a cryptocurrency network? The verification processes send signals with information to the entire crypto network about the transaction. The crypto network encrypts the information about the transaction, including the electronic address, quantity of crypto, and time stamp.
If a person wants to make a transaction then the transaction will first send a message with transaction information to the crypto network. On the network, all users can see the message. The transaction sits with other recent transactions that are waiting to be compiled into a block. Then the information in a block turns into a cryptographic code. Now here comes the part of crypto miners. Miners compete to solve the cryptographic code to add the new block to the blockchain network.
Once the miners are done solving the code, other users of the same crypto network verify the solution. After the validation process is completed, the new block with transaction information is added to the end of the blockchain network. Here is an easy step-by-step lesson on how is a transaction verified on a cryptocurrency network.
Step 1
First, Person A sends instructions to transfer crypto to Person B. Other users who are using the same network can view the instruction message.
Step 2
Then miners create a group of recent transactions and convert them into a block.
Step 3
The information about recent transactions in that block is transformed into a cryptographic code.
Step 4
Then miners compete with other miners to find the code first. Once they find the code by solving a complex puzzle, they add the new block with all recent transaction information to the blockchain.
Step 5
After the transaction verification, Person B receives the crypto sent by Person B.
Why Does The Transaction Process Of A Cryptocurrency Take A Long Time To Verify?
Each block is limited to 1 MB where they store transaction information. Miners help these blocks add to the blockchain network by decoding complex code. Their work is to verify transactions and get paid. The higher transaction value means higher fees for miners.
So, miners prioritize those blocks that contain a higher transaction value. If your transaction value is small, then miners will pay less attention to your block.
How Crypto Miners Earned Cryptocurrency? PoW (Proof of Work)
Now you know how miners verify cryptocurrency transactions. But how do they earn crypto in return for their work? The crypto miners earned crypto by submitting their PoW (proof of Work). When a miner solves a complex puzzle using the power of heavy computational mechanisms, the solution to the puzzle acts as proof of work.
Later, the network verifies whether this proof of work is valid. After the network approves the PoW, miners get paid in cryptocurrency for their hard work. This PoW is a highly secure process to verify cryptographic transactions. This also helps other nodes in the network to verify transactions.
Can A Crypto Miner Cheat?
Crypto miners solve mathematical puzzles to earn crypto as a reward. So, miners have to solve the complex puzzle to add the new block, which verifies the crypto transaction. Only this way do they get crypto in return for their work. Generally, there are three types of puzzles…
1. Byzantine Generals’ Problem
The Byzantine generals’ problem is a type of crypto puzzle that miners solve to get crypto as a reward. There will be a mix of honest and dishonest nodes; miners have to search the honest nodes and help them achieve consensus to add a new block to the network.
2. Hashes
To solve Hashes, miners add a nonce to the block header over and over. This method helps miners calculate the hash of a block. They add a nonce until the hash value generated is less than the target.
3. Double-Spending Problem
Now this Double-Spending problem is not a direct problem that miners have to focus on. This problem is solved automatically. When a miner solves a complex mathematical puzzle, they receive a PoW, which helps solve the Double-Spending issue. However, the double spending risks are very dangerous for the network.
Conclusion: Can I Reverse My Crypto Transaction?
In the end, if you face a failed crypto transaction, all you need to do is hold still until the rejected or failed transaction returns to the address from where it was sent. However, if the transaction is confirmed, then it cannot be reversed or canceled. I hope you got your answer all about ‘How is a transaction verified on a cryptocurrency network?’ and other important knowledge. If you have any other questions regarding this topic, feel free to ask me in the comment section.
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