How Hedera processes transactions, step by step
Hedera processes a transaction by hashgraph consensus, not by mining. Order comes from node gossip and virtual votes, and you need HBAR for the fee.
Vahe HakobyanEditor-in-chief
Updated Oct 6, 20263 min readFact-checked
On this page
Hedera is a public distributed ledger that reaches agreement with a type of proof of stake, not by mining. Nodes gossip each transaction to one another, then cast virtual votes on the order in which it arrived.
What you need before you start
Every Hedera transaction is submitted for an account, so you need that account's ID and the private key that controls it. HBAR is the native cryptocurrency of the system and pays the network fee on every transaction; any token you move is separate from that fee.
How does Hedera process a transaction step by step
Whatever the service, a submitted transaction travels the same path. Your wallet signs it, a node accepts it, and the network agrees on its place in the order.
- 1Sign and submit itYour wallet signs it with your private key and sends it to a Hedera node.
- 2Pass the node's checksThe node verifies the signature, the account, and the HBAR balance.
- 3Gossip it to peersThe node shares it with other nodes through the gossip about gossip protocol.
- 4Agree on the orderNodes vote virtually on the gossip, fixing the order and the timestamp.
- 5Run on the serviceWhen the round ends, every node processes the round's transactions, and the target service updates the shared state.
What happens after consensus
Once a transaction reaches consensus, it is final, and the record stays on the distributed ledger. A mistake in the recipient or the amount cannot be undone at that point.
- Save the transaction ID and any receipt.
- Keep the private key and recovery phrase offline.
- The IRS treats crypto as property, so buying HBAR with dollars is not taxable.
- Trading HBAR for another crypto, or paying with it, is taxable.
Frequently asked questions
It keeps a read-only copy of the ledger that wallets and explorers read from. It does not take part in consensus.
You can edit or discard it in your wallet before you sign. A signed transaction that has reached consensus is already executed on the ledger.
They share the same path through consensus. Only the service that runs at the end differs.
Your wallet shows it right after you submit, and it stays in your transaction history.
