From Horse Carts to Cryptocurrency: The Irresistible Rise of Blockchain Mastery (Part 6)

Mempool

Consider the mempool to be a cryptocurrency network's transaction queue. When you transfer Bitcoin to someone, the transaction proceeds through this waiting room. Miners then choose transactions from the waiting room and involve them in the blockchain. Transactions with greater costs are frequently chosen first. So, if the waiting area is packed, your transaction may take longer to be completed.

Transactions and unspent transaction outputs (UTXOs) are fundamental elements in blockchain systems such as Bitcoin.

When you send or receive cryptocurrency, you start a transaction. This transaction consists of information such as the sender's and recipient's addresses, as well as the amount of bitcoin being sent. Each transaction is digitally signed to confirm its authenticity.

UTXO (Unspent Transaction Output): When a transaction is sent to you, it generates a UTXO, which is similar to a digital currency waiting to be spent. UTXOs aren't considered a balance; rather, they reflect the unspent portion of earlier transactions. When you transmit Bitcoin, you build a new transaction with one or more UTXOs as inputs. After deducting the transaction, the leftover value creates a new UTXO.

Transaction fees

Transaction fees are fees that users pay for performing transactions on a blockchain network. These fees motivate miners to include transactions in the blocks that they mine. When a user begins a transaction, they may select the cost they want to pay. Miners often perform higher-fee transactions faster because they prioritize them to maximize their revenue. Transaction fees also contribute to network security by preventing spam and denial-of-service attacks. Transaction fees also help govern the quantity of accessible block space and contribute to the blockchain network's economic model.

Cryptocurrency wallet

A cryptocurrency wallet functions similarly to a digital bank account, allowing you to store, transfer, and receive money. When you establish a wallet, it produces a pair of cryptographic keys: a public and a private key. The public key functions similarly to an account number, allowing people to transfer their Bitcoin. The private key is similar to your password, which you use to access and manage your funds. When you want to send Bitcoin, you first generate a transaction in your wallet, sign it with your private key to establish ownership, and then declare it to the network. Miners then validate the transaction and record it on the blockchain. When you receive bitcoins, the sender uses your public key to transfer them to your wallet address. Your wallet uses the blockchain to store your balance and transaction history. Overall, a cryptocurrency wallet provides a safe way to handle your digital assets and interact with the blockchain network.

Hierarchically Deterministic Wallet

An HD wallet is a cryptocurrency wallet that generates an endless number of addresses from a single master seed. This improves privacy, security, and convenience of use. HD wallets also enable a hierarchical structure, which allows for better organization and administration of funds.

Segregated Witness (SegWit)

It is a protocol improvement for Bitcoin that separates transaction and signature data. This decreases transaction size, increases the number of transactions that can be handled per block, and resolves the transaction malleability issue. SegWit increases Bitcoin's scalability and security.