Blockchain transactions: main types and features

In early blockchains such as Bitcoin and Litecoin, the primary use case for transactions was transferring cryptocurrency between users.

In later blockchains such as Ethereum, BNB Chain, and Solana, more complex transaction scenarios became much more common, including swaps, asset transfers between networks, adding assets to liquidity pools, and more.

There is no single universal classification of blockchain transaction types, so for convenience, this article divides them into categories based on the nature of the operations they perform.

Main types of blockchain transactions

The first type of blockchain transaction is a standard cryptocurrency transfer from one wallet to another. Such types of blockchain transactions are called simple transactions, and their mechanics work as follows:

• The user initiates and signs the transaction;
• The signed transaction is transmitted to network nodes and, as a rule, enters the queue of unconfirmed operations;
• The network then verifies its validity;
• At the final stage, the transaction is recorded on the blockchain.

However, some blockchain transactions rely on more complex mechanisms.

For this article, a complex transaction is an operation that executes additional program logic or several related actions.

This type of blockchain transaction generally involves calling one or more smart contracts — autonomous programs that execute bilateral transactions based on predefined conditions.

As an example, let us consider a complex blockchain transaction involving the exchange of digital assets on a decentralized exchange:

1. The user selects the assets and the amount to be exchanged, after which the application obtains available routes and calculates the expected outcome of the operation;
2. If spending permission has not yet been granted for the selected token, the user may need to approve it — either through a separate transaction or a cryptographic signature, depending on the protocol being used;
3. The user signs the swap transaction and submits it to the network;
4. The decentralized exchange router calls the required smart contracts and executes the swap through one or more liquidity pools;
5. If the operation succeeds, the input tokens are deducted from the user's address, and the received asset is transferred to the specified address. The exchange logic accounts for the protocol fee, while the blockchain charges the network fee for executing the transaction.

The swap itself is often executed as a single transaction, although numerous internal smart-contract calls may occur while it is being processed.

Several smart contracts on the blockchain may be involved in such an operation at once:

• Token contract;
• Liquidity pool contract;
• Exchange contract, also known as the router.

For these types of blockchain transactions, even more complex scenarios may involve dozens of smart contracts at once, for example, when the operation involves multiple assets.

Another example of a complex transaction is sending assets to several addresses at once. Such types of blockchain transactions are used, for example, by large mining pools to distribute rewards to their participants and by crypto projects that transfer assets to participants in ICO* and airdrop* campaigns.

* ICO (Initial Coin Offering) — a method of raising funding for a crypto project through the issuance and sale of its own tokens to investors. The tokens received may provide access to the project's product or service or be used within its ecosystem.

* Airdrop — the free distribution of tokens to users, usually as part of project promotion, the launch of a new asset, or rewards for ecosystem participants. Eligibility conditions may include holding specific assets, using a protocol, or completing specified actions.

This type of blockchain transaction is also called a batch transaction. For example, a single Bitcoin transaction may contain multiple outputs transferring funds to different addresses.

Complex blockchain transactions come in several types.

Types of complex blockchain transactions

Smart contract transactions

Complex transactions involving smart contracts are widely used in decentralized finance (DeFi), and such operations include:

• Token exchanges (swaps);
• Buying and selling non-fungible tokens (NFTs) on marketplaces;
• Launching DeFi pools;
• Adding and withdrawing crypto assets from liquidity pools;
• Minting and burning tokens*;
• Lending and borrowing crypto assets;
• Staking* and other operations involving decentralized protocols.

* Token burning — the permanent removal of a portion of tokens from circulation, for example, by sending them to an address that cannot be accessed or by using a destruction function built into a smart contract. It is usually used to reduce the available supply of a token and, as a result, potentially increase the asset's price.

* Staking — locking or delegating crypto assets to participate in the operation of a blockchain that uses the Proof-of-Stake mechanism or one of its variations, with the possibility of earning rewards. More broadly, the term also refers to depositing tokens into various crypto protocols to earn income.

However, smart contracts aren't limited to decentralized finance; they also power DAOs, games, and many other applications.

Atomic swaps

Atomic swaps allow two parties to exchange crypto assets on different blockchains without transferring funds to a centralized intermediary. The key feature of such an exchange is atomicity: either both parts of the transaction complete successfully, or the exchange does not take place.

Classic atomic swaps may use cryptographic conditions such as HTLCs (Hash Time-Locked Contracts). Assets are locked on two networks so both parties can complete the exchange only if the specified conditions are met; if those conditions are not fulfilled, the funds can be returned to their owners.

Multisignature transactions

This type of blockchain transaction is used when it is necessary to increase the security of an operation. For example, multisignature schemes are used for corporate cold wallets operated by cryptocurrency exchanges, custodians (reserve holders), and brokers.

Technically, multisignature is better understood not as a separate universal transaction type, but as a method of authorizing the use of funds.

Several signatures from different parties are required to approve such a transaction: for example, 2 out of 3 or 3 out of 5. A specific approval threshold helps balance security and access to funds. For example, a 2-of-3 scheme prevents a single compromised key from independently controlling the assets.

This approach reduces the risk of unauthorized access to a wallet if the private key of one of the parties is compromised.

Data transactions

Transactions are used not only to carry out cryptocurrency operations, but also to transmit and record data on a blockchain.

For example, in the Bitcoin protocol, the OP_RETURN opcode of the Bitcoin Script language can be used for this purpose. It allows arbitrary data in a special unspendable transaction output — for example, an identifier, a message, or a document hash.

Smart-contract blockchains, such as Ethereum and Solana, also support data recording. Various types of blockchain transactions involving added data are used in identification systems, as well as for asset tokenization, where proof of the authenticity of information at a specific point in time is important.