Transaction verification in Blockchain

Question

Let us consider that we have an AltCoin named ABCCoin, ABC. I will be referred to as X, mined a block and got a freshly minted 25 ABC as a mining reward. Now, I want to gift this coin to a friend Y. So,

Tx: X -> Y : 25ABC

And let us assume that this was stored in block B100. Now after some months, Ms Y wants to transfer it to Z for any reason. So,

Tx: Y -> Z : 25ABC

Now, a few months later. Mr Z wanted to buy a coffee in Starbucks while going on a date with his girlfriend.

Now the chain of transcation will be as below:

|Tx|Minted -> X | --> "Tx: X -> Y : 25ABC" --> "Tx: Y -> Z : 25ABC" --> "Tx: Z -> Starbucks : 25ABC"

So, in this situation. When we need to verify "Tx: Z -> Starbucks: 25ABC" do we have to trace it back the origin, i.e. to the point when this coin was minted OR can it be just verified just by checking its immediate source. i.e. "Tx: X -> Y : 25ABC" and dont care about other previous.

Answer 1

Assuming You are asking about UTXO transaction based blockchains like bitcoin.

There are 2 types of verification

1. FullNode Verification

2. SPV Verification

Full node

A full node is a program that fully validates transactions and blocks such as bitcoin, lite coin or geth. So every time a full node receives a new block from another peer, It does validate all transactions in the block and adds to its blockchain and updates a list of UTXOs only if the block is fully valid.

to validate transactions, the full node checks something like

• Transaction format

• Transaction signature(s)

• find Previous transactions from its blockchain

• Double-spending transaction existence

Because a full node has a list of UTXOs that it believes is correct, checking transaction format/signatures and the list of UTXOs are enough to validate new transactions.

For SPV client doesn't have full blockchain data nor a list of UTXOs, SPV checks only if a transaction is in a block using MerkleTree and block which contains the transaction satisfies block difficulty or not. And this is all SPV can check because It has to check all block header and block bodies one by one to create the UTXOs list.