I’ve been trying to understand how transactions on a blockchain network are verified and secured. I understand that a decentralized network of computers, often called nodes, is involved in the verification process. But I’m not quite sure how this process works in detail. I’ve heard the phrases like “consensus algorithms” and “proof of work” come up, but I’m not clear on what they mean or how they contribute to the verification process. Could somebody explain to me how a transaction gets authenticated in a blockchain network? Also, what role does cryptography play in this process? Your inputs could really help me get a grip on this crucial aspect of blockchain technology.
When a transaction is made on a blockchain, it’s not immediately considered valid. It first requires verification. This verification process is carried out by nodes connected to the blockchain network. These nodes maintain and enforce the rules of the blockchain. Consensus algorithms like “Proof of Work” and “Proof of Stake” are used among these nodes to agree on the legitimacy of transactions. In Proof of Work, for example, nodes or miners solve complex mathematical problems and the first to solve it gets to add a block of transactions to the blockchain. This also prevents any bad actors from easily altering the network, as they would need to control more than 50% of the network’s power to do so.
Cryptography is a vital part of this transaction authentication process. When a transaction is made, it’s sent out to the network in the form of a message that includes the transaction details and digital signatures. Digital signatures use a combined set of private and public keys created using cryptographic algorithms, which link and secure the identities of the transacting parties. Public keys are visible to the network while private keys are kept secret by the owner, providing secure, verifiable and tamper-resistant transactions. This is the architecture that makes transactions on a blockchain secure, verified and trustworthy.
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