After obtaining a basic idea about the Blockchain technology, we know your next obvious query is to know how does Blockchain work!
Let’s take a look at the Blockchain diagram to understand it better
As we can see, Blockchain consists of many computers linked to each other instead of a central server. It is a chain of blocks containing different types of transactions or specific information, grouped in a peer-to-peer network.
The Blockchain structure consists of a distributed network, where each participant maintains, approves, and updates new entries. As every participant is in charge of recording and verifying the information, it results in automatic data verification making Blockchain more secure.
We can store the Blockchain in the form of a simple database or as a flat file. The data structures of Blockchain could be in the form of Pointers or Linked Lists.
The Pointers data structure allows every block to contain a variable that points to the location of another variable.
Under Linked Lists, the blocks are arranged in a sequence wherein each block links to the following block using a pointer.
The architecture of Blockchain is such that a single user cannot alter the data without the consensus of the entire network.
However, we can classify its architecture into three types:
Public Blockchain architecture
Public Blockchains like Bitcoin allow all participants to get data and access to the system. They are decentralized and immutable Blockchains. They incentivize validators to maintain a high level of security.
Private Blockchain architecture
Only authorized users have control over the Private Blockchains like Hyperledger. They are used to solve business cases and support corporate software solutions. The system is faster and efficient but lacks flexibility and self-sufficiency.
Consortium Blockchain architecture
Preliminary assigned users across different organizations set up and control this semi-private Blockchain. Consortium Blockchains are used to support cross-company and cross-discipline solutions.
Nodes are an important component of Blockchain
Nodes in Blockchain are active electronic devices such as computers, phones, or printers having internet connectivity and IP address. They serve as the foundation of the technology and support the network by maintaining a copy of the Blockchain and processing transactions.
A node could be a communication endpoint or a point of communication redistribution, linking to other nodes. The network considers all nodes as equal. However, certain nodes have different roles in supporting the network.
For example, only a Full Node downloads a complete copy of a Blockchain. It also checks new transactions coming in, based on the consensus protocol.
All nodes on a particular Blockchain use the same consensus protocol. They confirm and validate transactions, putting them into blocks. Each node makes its individual decision to validate or reject a transaction.
Other components of Blockchain include:
- Block
The Blockchain technology uses this data structure to keep a set of transactions, which it distributes to all nodes in the network. Every block references a preceding block called the parent block.
- Transaction to ledger
A transaction is a record or information that serves the purpose of the Blockchain. A group of transactions come together to form blocks and represent the current state of the Blockchain.
- Miners
Miners validate new transactions and record them on the Blockchain. They are the nodes responsible for verifying blocks. In the case of Bitcoin, Miners compete to solve a mathematical problem based on a cryptographic hash algorithm.
- Cryptography
Blockchain recognizes every block with a hash. It makes the technology secure. For example, Bitcoin uses SHA-256 cryptographic hash algorithm on the block header.
- Consensus Protocol
All nodes on the network agree on the same state of a Blockchain. Consensus Protocol is a set of rules or arrangements designed to carry out Blockchain operations.
Understanding the importance of consensus in the Blockchain
Consensus protocols in Blockchain prevent exploitation of the system by creating an irrefutable system of agreement between various devices across a distributed network. They keep nodes on the network synchronized to validate if the information is true. Hence, the nodes on the network must agree to the same state of the Blockchain.
Consensus rules prevent a single entity from controlling or derailing the entire Blockchain system. They are extremely costly to carry out in terms of time, the computing resources required, or the holdings of a particular cryptocurrency, and are hence, difficult to imitate or replicate.
The consensus methods vary depending on different Blockchains, which we shall discuss in the upcoming blog in our series.