_{Source: Unsplash}

INTRODUCTION

Trustless!

This term has been one watchword for which blockchain has been described. Blockchain introduced decentralization for one primary aim – to remove the need for a trusted third party in human activities like transactions. Hence, leaving us in a trustless environment.

Trust!

The knowledge that humans still need to hold on to a belief that there’s something they can trust to verify their transactions solidifies the need for a trust system. This trust system entails verifying transactions before they are added to the chain of blocks. Verification is important to confirm the authenticity of transactions and the need for this has given rise to a number of transaction verification methods in various blockchains.

“Trust in a trustless ecosystem.” That is basically what blockchain technology encapsulates.

WHAT ARE TRANSACTION VERIFICATION METHODS?

Transaction verification methods are techniques which various blockchains employ to validate the authenticity of transactions.

Verifying transactions is essential to blockchains as they help in confirming the accuracy and authenticity of transactions before they are added to the chains of blocks. This act also helps to secure blockchains to prevent malicious transactions that can attack the chain from occurring and as such, they are a vital part of blockchain technology.

The rise in the number of deployed blockchains over the years has led to a rise in the number of transaction verification methods available.

TYPES OF TRANSACTION VERIFICATION METHODS IN BLOCKCHAINS

VALIDITY OR ZK PROOFS

_{Source: Zionodes}

Validity proofs are also referred to as zk proofs because they are used by zero knowledge rollups like Scroll, Polygon, zkSync, StarkNet. Rollups are a type of layer 2 scaling solution, developed to help improve scalability for layer 1 blockchains.

They are platforms that process transactions outside the blockchain, roll them up in batches (hence, the name rollup) and compile the batches to be sent to the main network, thereby giving the main chain more space to process more transactions. Rollups generally can be classified as optimistic rollups and zero knowledge (zk) rollups as they differ in their modes of sending transactions back to the main chain.

Zk rollups process transactions off the main blockchain but send only validity proofs of the transactions to the main chain rather than the entire details. These validity proofs, also called zk proofs, are cryptographic evidence which one party (the prover) sends to another party (the verifier) to show that a transaction truly happened and is genuine but doesn’t disclose the actual details of the transactions.

Zk rollups use validity proofs to prove to the main chains that the transactions being processed by their networks are authentic and accurate. Doing this allows them to share the main blockchain’s security.

FRAUD PROOFS

Fraud proofs are utilized by the other type of rollups: optimistic rollups. Optimistic rollups, just like zk rollups, process transactions off the main chain but instead of sending proofs of the transactions to the main chain, they utilize a fraud proving system.

Little information about the compressed batches of processed transactions are sent to the main chain with no proof that the transactions are actually valid because the rollup assumes their authenticity. Validators on the main chain are then responsible for checking the validity of the transactions they’ve received. If any transaction is found faulty, a fraud proof (details of the invalid transaction) is published to the main chain’s smart contract. The faulty transaction(s) is then removed from the main chain.

Optimistic rollups don’t validate transactions prior to when they send them to the main chain, it’s the main chain’s validators that do the work of validating transactions, after which the optimistic rollups then carry out their own validation. Think of it like an “innocent, until proven guilty” model.

As these rollups help scale the main chain by giving it more space to process other transactions, they inherit its security.

CONSENSUS MECHANISM

This is a model used by various blockchains to reach an agreement on how transactions will be validated to maintain security across the networks. There are over a thousand layer 1 blockchains in existence, each with its own method of verifying transactions.

There are several consensus mechanisms which have been developed but haven’t been implemented by any blockchain yet. While there are many already in use. Below are a few consensus mechanisms already being utilized.

_{Source: ResearchGate}

Proof-of-Work (PoW): PoW is one of the few popular consensus mechanisms being utilized by the first known blockchain, Bitcoin. In PoW blockchains, there are people tasked with the responsibility of verifying transactions that occur on-chain. They are called miners.

Verifying transactions in PoW blockchains require a lot of complex computational mathematical problems to be solved before transactions are added to the chain of blocks. Blockchains that utilize this mechanism are known to be one of the highest consumers of energy because very powerful computers are used in mining.

Any miner that first succeeds in solving the computational problem (to verify a transaction) automatically produces the block that is then added to the chain of other blocks, the miner is then rewarded with the native token of the blockchain.

Proof of Stake (PoS): this is another very popular consensus mechanism used by various blockchains to ensure that transactions are validated. Ethereum is one of the few blockchains that employ the use of PoS in verifying blockchains and securing the network. Proof-of-Stake involves the use of staked tokens to validate transactions. Stakers delegate their tokens to validators, who then use the staked tokens to verify new transactions before they are added to the chain of blocks and the stakers are rewarded for this.

In the PoS case, no computational problem needs to be solved for transactions to be validated and as such, there’s no need to invest in expensive computers. Instead, people looking to become validators for PoS blockchains will need to stake a large number of their own tokens before they can become validators. Other blockchains that use PoS are Solana, Algorand, Cardano, Cosmos, Polkadot, etcetera.

Proof of Authority (PoA): this is a consensus mechanism whereby validators are properly vetted before they are allowed to validate transactions. Potential validators “stake” their identity rather than tokens, unlike in the PoS mechanism. Meaning, they’ve got to earn the right to validate transactions.

VeChain is an example of a blockchain that uses the PoA mechanism.

Delegated Proof of Stake (DPoS): this is a type of PoS mechanism. In this case, stakers vote who they’ll delegate their tokens to. Those elected will take the responsibility of validating transactions on the next block. This “voting” is done by the stakers putting their tokens in a staking pool and assigning the staked tokens to their preferred choice of delegates.

Examples of blockchains that employ the DPoS mechanism for validating transactions are EOS, Lisk, SUI, Tron, etc.

Proof of Burn (PoB): in the PoB method of validating transactions, prospective validators will have to burn a certain amount of their own tokens to have a chance to take part in the process of verifying transactions for the blockchain.

“Burn”, in crypto terms refers to permanently destroying cryptocurrencies to remove it from circulation. People burn cryptocurrencies to increase the value as this process creates scarcity of the token.

Slimcoin is known to employ this mechanism in validating its transactions and creating new tokens.

There are many other consensus mechanisms which blockchains utilize to validate transactions besides the above listed.

Proof of Activity (PoA), Proof of History (PoH), Proof of Reputation (PoR), Proof of Identity (PoI), Proof of Capacity (PoC), Proof of Elapsed Time (PoET), Proof of Importance (PoI) are all examples of consensus mechanisms.

DIRECT PROOFS

Direct proofs are the simplest kind of proofs in that they don’t require complex computational work to be done. Typically, direct proofs are used to confirm the truth of a statement using mathematical concepts.

This kind of proof involves providing direct evidence to support a truth claim. They can be used in blockchain transaction verification. However, blockchains do not utilize direct proofs in the same way as they do the others. Rather, the proofs rely on the rules already established by the blockchain protocol.

CONCLUSION

While blockchain technology is very difficult to hack in itself, there are other ways hackers can get through and one of them is by manipulating the transactions that are sent to the chain. A successful malicious transaction going into a blockchain network can lead to loss of millions in crypto assets. Hence, the reason blockchains ensure strict validation measures before adding any transaction into the network.

Julia Ofoegbu is a Content Fellow