My Current Mental Model for a Blockchain Transaction

A transaction in Web3 typically goes through the following phases:

1. User Action#

A user initiates a transaction via a wallet (e.g., MetaMask) or decentralized application (dApp). This could be a token transfer, smart contract interaction, or contract deployment.

These parameters are provided in the transaction:

Recipient Address: The destination (e.g., another wallet or smart contract).
Value: Amount of cryptocurrency (e.g., ETH) to send.
Data: Input for smart contract functions (encoded as hexadecimal).
Gas Limit: Maximum computational work allowed (paid in gas units).
Gas Price (or Priority Fee): Fee per gas unit (determines transaction priority).
Nonce: A sequential number unique to the sender’s account (prevents replay attacks).

2. Signing the Transaction#

When a user initiates a transaction, they provide the transaction details and sign it with their private key. Signature prove ownership and authorize the transaction from the user.

3. Broadcasting the Transaction#

The signed transaction is broadcasted to the blockchain network of nodes. There are three types of nodes:

Full Node: Stores the entire blockchain and can validate blocks and transactions.
Light Node: Stores only the header information of the blockchain and relies on full nodes for other information.
Validator Node: Participates in the consensus process and has the authority to validate transactions.

The signed transaction is broadcast to a node (e.g., via JSON-RPC to an Ethereum node or services like Infura/Alchemy). The node forwards the transaction to peers, spreading it across the network.

4. Transaction Validation#

Once received, the node (in most cases, a full node) validates the transaction. Node performs:

Verifying the transaction’s signature.
Checking the sufficiency of user balances.
Ensuring the transaction format is correct.
Ensure the nonce matches the sender’s next expected nonce.
Validate gas limit and price are acceptable.

Invalid transactions are rejected; valid ones enter the mempool (memory pool).

5. Adding to the Block#

Once in the mempool, validators typically choose transactions with the highest gas fees. They propose these transactions to be added to a new block. The block is added to the blockchain after consensus is achieved among the nodes. Once added to the blockchain, the transaction is considered confirmed (1st confirmation). Each subsequent block increases confirmation count, making the transaction more irreversible (e.g., 6 confirmations for Bitcoin).