Ethereum, at its core, is a distributed ledger that records transactions. Today, July 14, 2025, at 15:15:33, the Ethereum network processes millions of these transactions, grouped into blocks.
Table of contents
What is a Transaction?
An Ethereum transaction represents a transfer of value or data on the Ethereum blockchain. Unlike traditional financial transactions, Ethereum transactions are facilitated directly between users, eliminating intermediaries.
Key Components
- Gas: A fee required to execute a transaction on the Ethereum network.
- Blocks: Group of transactions.
- Smart Contracts: Transactions can interact with smart contracts, executing code and altering the contract’s state.
Transaction Costs
Gas fees are a critical part of the network, but improvements like sharding and rollups are aiming to decrease these costs, making transactions more affordable.
Ethereum, at its core, is a distributed ledger that records transactions. Today, July 14, 2025, at 15:15:33, the Ethereum network processes millions of these transactions, grouped into blocks.
An Ethereum transaction represents a transfer of value or data on the Ethereum blockchain. Unlike traditional financial transactions, Ethereum transactions are facilitated directly between users, eliminating intermediaries.
- Gas: A fee required to execute a transaction on the Ethereum network.
- Blocks: Group of transactions.
- Smart Contracts: Transactions can interact with smart contracts, executing code and altering the contract’s state.
Gas fees are a critical part of the network, but improvements like sharding and rollups are aiming to decrease these costs, making transactions more affordable.
Anatomy of an Ethereum Transaction
Each Ethereum transaction contains several key pieces of information:
- Nonce: A counter that indicates the number of transactions sent from the sender’s address. This prevents replay attacks.
- Gas Price: The amount of Ether the sender is willing to pay per unit of gas. Higher gas prices generally lead to faster transaction confirmation.
- Gas Limit: The maximum amount of gas the transaction is allowed to consume. If the transaction runs out of gas before completion, the transaction reverts, but the gas is still spent.
- To: The recipient’s address. This can be another user’s address or a smart contract address.
- Value: The amount of Ether to be transferred to the recipient.
- Data: Optional field containing data to be executed by a smart contract. This is how you interact with and call functions within a smart contract.
- v, r, s: The digital signature of the transaction, used to verify the sender’s identity and ensure the transaction hasn’t been tampered with.
How Transactions Work: A Step-by-Step Guide
- Transaction Creation: A user creates a transaction and signs it with their private key. This signature proves they authorized the transaction.
- Transaction Broadcasting: The signed transaction is broadcast to the Ethereum network.
- Transaction Validation: Ethereum nodes receive the transaction and verify its validity. This includes checking the sender’s signature, ensuring they have sufficient funds, and that the gas limit is sufficient for the operation.
- Transaction Inclusion in a Block: A miner (or validator in Proof-of-Stake) selects transactions from the transaction pool, orders them, and includes them in a new block.
- Block Propagation: The new block is propagated to the network.
- Block Confirmation: Other nodes verify the block’s validity and add it to their copy of the blockchain. The transactions within the block are now considered confirmed. The more blocks built on top of this block, the higher the level of confirmation and the harder it is to reverse the transaction.
Transaction Types
While most transactions involve transferring Ether, there are other important transaction types:
- Ether Transfers: Sending Ether from one account to another.
- Smart Contract Deployments: Deploying new smart contracts to the Ethereum blockchain.
- Smart Contract Interactions: Calling functions within existing smart contracts. This is the core of decentralized applications (dApps).
- Token Transfers: Transferring tokens (like ERC-20 tokens) between accounts.
Monitoring Transactions
It is possible to monitor crypto transactions in real-time and at scale to detect complex cross-chain financial crime and uncover links to money laundering, but it is not needed for a normal user.
The Future of Ethereum Transactions
As Ethereum continues to evolve, transaction efficiency and scalability remain key priorities. Layer-2 scaling solutions like rollups, coupled with improvements to the core protocol, are paving the way for a more scalable and affordable Ethereum ecosystem. The ongoing development and adoption of technologies like blobs (as introduced by EIP-4844) further optimizes transaction data storage and processing.
