Tracking Internal Transactions on Ethereum

Written by
Tatum team
May 31, 2023
min. read

Ethereum’s blockchain architecture allows for a type of transaction known as an "internal transaction." These transactions are performed by smart contracts, and not directly initiated by an external actor. They represent a key part of Ethereum's programmable economy, enabling complex operations like DeFi swaps and automatic yield farming. However, due to their nature, tracking these transactions can be complex. In this guide, we'll discuss why you need to monitor these transactions and how Tatum SDK makes it easier.

[.c-text-center]Easily Monitor Transactions With Tatum SDK[.c-text-center]

[.c-text-center]Simplify the process of monitoring transactions with the Tatum SDK to get instant blockchain event notifications.[.c-text-center]

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Understanding internal transactions

  • Origin: Internal transactions are generated when a smart contract initiates a transfer of ETH to another address as part of its code execution.

  • Visibility: Unlike regular transactions that are directly visible on the blockchain, internal transactions aren’t explicitly listed, making them harder to track.

Why monitor internal transactions?

Monitoring internal transactions within blockchain networks plays a critical role in detecting unusual activity, managing smart contract interactions, and ensuring audit-ability and compliance. Let's delve into the reasons why monitoring internal transactions is essential:

  • Detecting Unusual Activity: By closely monitoring internal transactions, you can identify any unusual or fraudulent activity within the blockchain network. Unexpected or unauthorised transactions can serve as early warning signs of a potential security breach or malicious activity. Timely detection allows for swift action to mitigate risks, protect assets, and maintain the integrity of the network.
  • Managing Smart Contract Interactions: For individuals interacting with decentralised finance (DeFi) platforms or other smart contracts, monitoring internal transactions is crucial. Tracking these transactions provides insights into how funds are moving within the ecosystem, allowing users to have a clear understanding of their interactions. This knowledge empowers users to make informed decisions, track their assets, and ensure the desired outcomes of their interactions with smart contracts.
  • Audit and Compliance: Monitoring internal transactions is particularly important for businesses and developers who require robust audit trails and compliance with regulatory frameworks. By keeping a record of internal transactions, businesses can provide transparency and accountability, meeting regulatory obligations. Monitoring internal transactions also facilitates internal audits, ensuring accuracy, preventing fraud, and maintaining a high level of compliance with industry standards.

The challenge of monitoring internal transactions

Monitoring internal transactions is not straightforward. To do it manually, you would need to run your own Ethereum Archive node with debug mode enabled, or pay for an expensive third-party service. This is beyond the scope and budget of most users and developers.

Setting up Internal Transaction Monitoring with Tatum SDK:

In this code snippet, we initialize the Tatum SDK for the Ethereum network. We then subscribe to internal transactions for a specific Ethereum address using the `notification.subscribe.incomingInternalTx` method.

Internal transactions are an integral part of the Ethereum ecosystem, enabling complex smart contract interactions. Tracking these transactions is crucial for security, compliance, and financial management. With Tatum SDK, this complex task becomes simple, eliminating the need for expensive infrastructure and technical expertise.

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By integrating the Tatum SDK into your project, you can ensure seamless integration with MetaMask, receive timely notifications, and enjoy the benefits of efficient monitoring of internal transactions on the entire chain without the complexities of the direct RPC approach or managing an archive node. Don't wait, get started with the Tatum SDK today!