An Ethereum transaction is a digital record of an interaction between two parties. Transactions are stored on the Ethereum blockchain, which is a smart contracts-enabled distributed ledger that contains a record of all transactions that have ever been executed.
Technically, a transaction is a digital signature that allows the owner of a cryptocurrency to transfer funds to another person or entity. They are verified by network nodes through cryptography and recorded on the blockchain.
In a proof of work system like Ethereum, transactions are executed by miners, which are nodes in the network that validate and execute transactions. However, the same role can be confirmed by validators in a proof of stake system. Every transaction has a sender and a recipient, and a value that is transferred from the sender to the recipient.
Ethereum transactions are similar to Bitcoin transactions, but they also have the ability to contain custom data and smart contracts as mentioned earlier. Smart contracts are computer programs that can automatically execute the terms of a contract when certain conditions are met. This allows for greater flexibility and functionality than traditional contracts.
How Ethereum Transaction Works
An Ethereum transaction changes the state of the network by notifying every node on the network.
This means that any node on the Ethereum network can announce a request for a transaction to be carried out on the network, after which a miner executes the transaction by updating the whole network.
The Ethereum transaction demands a gas fee that must be paid to miners/validators before the transaction is posted.
Details of a Typical Ethereum Transaction
To begin with, an Ethereum transaction begins with the sender address, that is, the person posting the transaction on the network. Meanwhile, the recipient address is the one receiving the transaction.
A level deeper, every Ethereum transaction consists of six fields: nonce, gas price, gas limit, to, value, and data.
- The nonce is a number that represents the number of transactions that have been sent from a particular address.
- The gas price is the amount of ether that the sender is willing to pay for each unit of gas.
- The gas limit is the maximum amount of gas that the sender is willing to pay for the transaction.
- The “To” field is the address of the recipient of the transaction.
- The value field is the amount of ether that the sender is willing to send to the recipient.
- The data field is the data that the sender is including in the transaction.
What Happens When an Ethereum Transaction is initiated?
A transaction hash is often generated by cryptography and broadcasted to the network and entered into a pool with other transactions.
Your transaction is taken by a miner who includes it in a block for the essence of verification. Sometimes, the process is slow in a situation whereby the network is busy, and miners are not sufficient enough to fasten the process. Finally, the transaction will be confirmed. You should know that an increased number of confirmations signify the recognition of the transaction by the network.