The most common is an transfer between a buyer and seller. In the majority of cases, it is a good or service traded for currency (or money). This is what replaced the old barter system. It is possible for transactions to be goods-for-services or goods-for-goods.
The digital world introduced a new form of transaction. Before this medium, transactions were either physical or financial. Over time, as communication systems evolved, transactions were altered.
Stock traders are a prime example of how things changed over the years. All trades were originally handled by people on the floors of the exchanges. The orders came in from brokerage firms around the world who were dealing with their customers via telephone.
If we fast forward, stock buyers access their accounts via the Internet. They log onto the website of the financial institution and do their trading from there. The process is mostly automated as human traders were removed. It is all done by computers.
We can also look at how many trades originate. With trading software utilized by the investment banks, hedge funds, and other financial entities we see further automation. Now the decision to buy or sell is determined by software and not humans.
The net result was an massive increase in the number of transactions. Since the financial realm was easiest to digitize since it basically is numbers, this experienced huge volume jumps.
Not only are we looking at the uploading by content creators as transactions. We also have comments, voting, and forwarding of content to others. People also follow/unfollow others. All of these are transactions that take place on the Internet. With billions of users each day, the number of transactions is into tens of billions each day.
Other Forms of Transactions
In the monetary system, the banks are the ones responsible for keeping the ledger of financial transactions. Within private financial institutions, such as Visa or Mastercard, they maintain their own transactions.
The transactions at the commercial bank layer are complimented by those done by the central banks. When dollars are moved from one bank to another, inter-bank settlement is done utilizing central bank money (reserves).
We also see the same thing in real estate. A transaction here included the selling of a property to another. In this industry, this involved a closing whereby all the financial arrangements are put in place and the deed transferred.
The key in a financial transaction is that some kind of payment is made.
- Within the retail sector, a buyer much pay for the goods or service, either in cash or with a credit card.
- In financial markets, payments are made out of brokerage accounts immediately at the time of the transaction even though settlement can take a couple days.
- As mentioned, a check or wire is issued during a real estate closing, completely the transaction.
Within cryptocurrency, this is an exchange that takes place on a blockchain. Each transaction is recorded using the distributed ledger technology. The transactions are decentralized meaning that no central bank or other banking entity is involved in the process which is the case with fiat currency.
Individuals are able to send cryptocurrency directly from one wallet to another using this peer-to-peer (P2P) technology. This is done using the private key that each wallet has. Each is encrypted before being broadcast to the distributed ledger.
Posted Using LeoFinance Beta