Transaction processing is designed to maintain a database Integrity (typically a database or some modern filesystems) in a known, consistent state, by ensuring that any operations carried out on the system that are interdependent are either all completed successfully or all canceled successfully.
For example, consider a typical banking transaction that involves moving $700 from a customer's savings account to a customer's checking account. This transaction is a single operation in the eyes of the bank, but it involves at least two separate operations in computer terms: debiting the savings account by $700, and crediting the checking account by $700. If the debit operation succeeds but the credit does not (or vice versa), the books of the bank will not balance at the end of the day. There must therefore be a way to ensure that either both operations succeed or both fail, so that there is never any inconsistency in the bank's database as a whole. Transaction processing is designed to provide this.
Transaction processing allows multiple individual operations to be linked together automatically as a single, indivisible transaction. The transaction-processing system ensures that either all operations in a transaction are completed without error, or none of them are. If some of the operations are completed but errors occur when the others are attempted, the transaction-processing system "rolls back" all of the operations of the transaction (including the successful ones), thereby erasing all traces of the transaction and restoring the system to the consistent, known state that it was in before processing of the transaction began. If all operations of a transaction are completed successfully, the transaction is committed by the system, and all changes to the database are made permanent; the transaction cannot be rolled back once this is done.
Transaction processing guards against hardware and software errors that might leave a transaction partially completed, with the system left in an unknown, inconsistent state. If the computer system crashes in the middle of a transaction, the transaction processing system guarantees that all operations in any uncommitted (i.e., not completely processed) transactions are cancelled.
Most of the time, transactions are issued concurrently. If they overlap (i.e. need to touch the same portion of the database), this can create conflicts. For example, if the customer mentioned in the example above has $1000 in his savings account and attempts to transfer $350 to a different person while at the same time moving $700 to the checking account, only one of them can succeed. However, forcing transactions to be processed sequentially (i.e. without overlapping in time) is inefficient. Therefore, under concurrency, transaction processing usually guarantees that the end result reflects a conflict-free outcome that can be reached as if executing the transactions sequentially in any order (a property called serializability). In our example, this means that no matter which transaction was issued first, either the transfer to a different person or the move to the checking account has succeeded, while the other one has failed.
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