How Does Ethereum Handle Transactions?
Ethereum manages transactions through a decentralized network of nodes, where each node maintains a copy of the blockchain. When a user initiates a transaction, such as transferring Ether (ETH) or executing a smart contract, the transaction is packaged into a data structure called a "transaction." This transaction contains crucial information, including the sender's address, the recipient's address, the amount of ETH being transferred, and a gas limit.
Transaction Validation
Once the transaction is created, it is broadcasted to the network. Miners, who validate transactions, compete to add the next block to the blockchain by solving complex mathematical problems. The miner who solves the problem first validates the transactions in that block.
Gas Fees
Each transaction requires a fee known as "gas," which compensates miners for their computational efforts. Users specify the gas price they are willing to pay, and miners prioritize transactions with higher gas prices, impacting transaction speeds during network congestion.
Finalization
Once a miner successfully adds a block of transactions to the blockchain, the transactions are considered confirmed. The blockchain serves as a public ledger, ensuring transparency and security. Each subsequent block reinforces the confirmation of previous transactions, making it increasingly difficult to alter past records.
Smart Contracts
In addition to ETH transfers, Ethereum enables complex transactions through smart contracts, which are self-executing contracts with the agreement directly written into code. These contracts facilitate automated, trustless transactions, broadening Ethereum's utility beyond simple currency transfers.