How to create and sign an Ethereum transaction?

Since all digital assets are created through transactions, signatures play a vital role in any blockchain. In this article, we'll show you how to sign Ethereum transactions, and explore how these numbers can be used to sign operations that manipulate digital assets and more.

Transactions - with old transactions, with new transactions

Are blockchain transactions no different than bank transactions? Today, most banks make it easy to use digital means to send money to someone, deposit money into your savings account, and even take out a loan. The Internet age has enabled us to perform most of these actions online without any physical interaction.

Although they are easy to use, these operations are far from easy and cheap for banks. Behind the scenes, multiple third parties are involved in the clearing, verification and validation of your banking operations, all while maintaining compliance with banking regulations.

Financial institutions must take lengthy steps to ensure that you are indeed an individual authorized to operate your account. All of these tiers incur significant costs, one of the many reasons why payment gateways like Visa or Mastercard typically charge a fee per purchase based on the transaction amount. Of course, these operations can be frozen whenever and wherever, and can also be reverted under certain circumstances.

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The behavior of blockchain transactions follows a different set of rules

Due to the distributed and permissionless nature of public blockchains, anyone can sign transactions and broadcast them to the network. Depending on the blockchain, you'll charge a fee to allow transactions to be "mined" (i.e. picked up by miners and included in the blockchain), but that fee is usually based on user demand in the blockchain, not based on The value of the asset in the transaction. For example, sending $1 from one Ethereum account to another will cost the same as sending $1 million. Miners can accept both transactions equally and add them to valid blocks for broadcast to the blockchain.

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Additionally, blockchain transactions do not require verification by any central authority. In order for a transaction to be valid, it simply needs to be signed with a private key using the Digital Signature Algorithm (DSA) corresponding to its blockchain. The Ethereum and Bitcoin blockchains use the ECDSA algorithm, while other projects like Cardano or Polkadot rely on the EdDSA algorithm.

Both rely on elliptic curves, while the latter uses twisted Edwards curves, an improvement over common digital signatures. Although any private key can be used to sign a transaction, a transfer transaction will only execute successfully if the account associated with the private key used to sign the transaction contains sufficient funds.

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Once a transaction is signed, broadcast to the network and mined into a successful block in the network, there is no way to restore the transaction. Unlike banking, successfully mined blockchain transactions cannot be reverted or restored to the state of previous transactions. The nature of most public blockchain transactions makes them visible, and therefore, the blockchain used for these transactions is the ultimate source of truth for these assets.

Ethereum Transaction Structure

Now that we have a good understanding of the nature of blockchain transactions, we are ready to create our first Ethereum-based transaction. We'll start with a simple transfer transaction: 0.1 ETH to address.

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Transactions can be described using JavaScript Object Notation (JSON), so when creating the transaction, use MyEtherWallet (after logging in via send offline) as follows:

Then several values pop up: nonce, gasLimit, gasPrice, data, and chainId. It's not about what we trade, it's about how our trades are executed. This is because in sending transactions in Ethereum, you have to define some additional parameters to tell miners how to process your transaction. Two properties in our transaction involve "gas", which is a measure of computational work that must be paid to Ethereum miners in order to submit the transaction to the blockchain network.

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One is the gasPrice (expressed in units called Gwei, equal to 1/10 is Ethereum's native token Ether), and the other is the gasLimit, which is the maximum amount of gas you are allowed to use in your transactions. These values can be estimated from Ethereum nodes, so are usually filled in automatically by wallet providers.

In addition to the gas parameter, you must also specify on which specific Ethereum network this transaction will be executed. The Ethereum network includes the mainnet (mainnet) with chaidId 1, but since testnet ETH can be requested or funded via an online faucet, there is no risk of any economic value to other testnets (testnets) where transactions can be submitted to you. Typically, when developing a Dapp, you will first run it on the local network, then deploy it to the testnet as a final step before going to the mainnet.

Last but not least, we have data and nonce, which you can attach as part of the transaction if you need to commit some other data. When interacting with a smart contract, the data field will contain your instructions for that contract.

A nonce ("a number used only once") is a value used by the Ethereum network to track transactions, helping to avoid double spending and replay attacks in the network. Sometimes transactions get stuck in the network due to low gas prices, so broadcast transactions with higher prices, but the same nonce effectively "replaces" pending transactions in the network after miners take over (once "slow" can see "" transaction, because it has the same nonce as the approved transaction, it will be rejected).

Sign an Ethereum transaction

Grabbing our previous JSON, we can finally move on to the signing process. As we mentioned, this process involves the ECDSA algorithm. To sign transactions with ECDSA, we will use the popular ethers.js library, which already wraps the necessary calls to the elliptic curve package in order to use the secp256k1 curve with the ECDSA algorithm.

You can test this code online in Runkit and match it with the results from MyEtherWallet (MEW) using your private key.

The result represents your signed transaction, which can be broadcast to the Ethereum network.

You can use MEW directly or Alchemy's online utility Composer, which allows you to pass signed transactions to the Ethereum network using the RPC API method eth_sendRawTransaction for communicating with Ethereum nodes.

Sign now, transfer later

Transaction signing performed as described above is called "offline signing". Since our private key is under our control, we can use the Ethereum account to create a signature verification and later broadcast it to the Ethereum network. Many online wallets do both signing and broadcasting (e.g. Metamask, Portis). However, offline signing is particularly useful for applications such as state channels, which are smart contracts that track balances between two accounts, and where funds can be transferred as soon as a signed transaction is submitted.

Off-chain signing is also a common practice in decentralized exchanges (DEXes), where buy and sell orders are stored off-chain and only settled on-chain if they match an order that fits a previously signed transaction .

With Portis, you can sign transactions to interact with the Gas Station Network (GSN). In order to interact with the GSN, Portis subscribes to a pool of relayers that are able to pay the gas fees for your transactions. These relayers subscribe to a decentralized contract (such as this one in the Ropsten testnet), and Portis sends them requests to relay your transaction. You still need to sign transactions (after all, unsigned signatures are meaningless), but the Portis widget does all the previous processing in the background, so users can start signing transactions and interacting with smart contracts even with a brand new wallet . Gas fees can be paid without ETH.

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