How do Crypto transactions work?

Cryptocurrency transactions involve transferring digital assets from one person to another through a blockchain network. Here's how the process works:

1. Initiating a Transaction:

   • When you want to send cryptocurrency, you use a wallet, which is a software or hardware tool that stores your private and public keys. The private key is used to sign the transaction and prove ownership of the funds, while the public key acts as your address to receive funds.
   • You enter the recipient's public wallet address, specify the amount of cryptocurrency to send, and then initiate the transaction.

2. Broadcasting the Transaction:

   • Once signed, the transaction is broadcasted to the cryptocurrency network, where it is propagated to all participating nodes (computers connected to the network).

3. Validation by Miners or Validators:

   • In a Proof of Work (PoW) system (like Bitcoin), miners compete to solve complex mathematical problems to validate transactions and add them to the blockchain. In a Proof of Stake (PoS) system (like Ethereum 2.0), validators are chosen based on the number of coins they hold and are willing to "stake" as collateral.
   • Miners or validators check that the transaction is legitimate, ensuring the sender has enough funds, the correct private key was used, and the transaction hasn't already been spent (double-spending prevention).

4. Inclusion in a Block:

   • Once validated, the transaction is grouped with others into a block. This block is added to the blockchain, a public ledger of all transactions ever made with that cryptocurrency.
   • The blockchain is immutable, meaning once a transaction is added, it cannot be altered or deleted.

5. Confirmation:

   • Each block added to the blockchain represents a confirmation. The more confirmations a transaction has, the more secure it is considered. Typically, after a few confirmations, the transaction is considered irreversible.

6. Completion:

   • The recipient's wallet detects the transaction on the blockchain and updates their balance accordingly. The transaction is now complete, and the cryptocurrency has successfully been transferred.

This entire process is decentralized, meaning it doesn't rely on any central authority, like a bank, but rather on a distributed network of computers that collectively verify and secure the transaction.