Blockchain Architecture: Blocks, Mining, Transactions & Benefits

The term ‘blockchain‘ refers to the architecture that comes in the way of storing information in the form of blocks digitally. Here ‘chain’ refers to the database created by the network of computers, correlated within each other. Also referred to as Distributed Ledger Technology, a block can be defined as a data structure in itself that needs to qualify the following factors to get into the database:

• Money transaction – As soon as the request arrives, it needs to be verified.
• Post verification, the transaction can now reach into a block of the database, containing the transaction amount, digital signatures, and the website.
• Here, the specific block also receives a code (#) that requires it to get added into the chain.

This way, none of the data gets replicated or copied, and instead, it only makes the information easy for distribution, ensuring transparency, security, and trust. 

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However, when it comes to blockchain architecture, the overall distribution works in complex ways, where each block distributes data across networks. In a database, the systems are all set on similar data rules and conditions, it is therefore known as the shared state.

The entire operation in this architecture works on the three factors: decentralization, liability, and protection. Because of the strong possibilities of maximizing efficiency in cost-effective ways, applications derived from blockchain technology are often evolving continually. 

To understand the vast, seamless movement of data, one needs to go through critical elements like blocks, transactions, mining, and consensus.

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Blocks

As defined previously, blocks are data sets and contain valuable information as a block header that helps in its verification in a neighborhood. The information contained in the block header can be defined as:

• the current version of the block
• previous block header hash as a reference to the parent block
• an encrypted hash of all transactions taking place in this block known as Merkle root hash
• time of the block creation
• nBits
• nonce – any random number that is assigned by a block creator that can be changed as and when required

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The remaining part in a block consists of transactions set by the data miner to include in the block. In terms of the blockchain architecture, there are different types of blocks based on their functionalities:

• Main branch blocks – The ones that extend the main blockchain network in current use.
• Side branch blocks – These refer to parent blocks that aren’t present in the current blockchain.
• Orphan blocks – These refer to parent blocks unknown to the node analyzing the current blockchain.

Read: Different Types of Blockchain & Their Uses

Transactions

Transactions, on the other hand, are what drive any blockchain network, containing the address of the recipient, sender, and respective values. It is the transactions that are collated and sent across nodes in blocks, which then get processed by each node individually.

It is this continuous movement of data that builds up the blockchain architecture. Each transaction can have single/multiple inputs and outputs. Here input means the reference value from a previous transaction, and output means the amount and address. 

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Mining

Mining is what drives the blockchain architecture into working seamlessly. Their work is similar to that of the credit card processing network. Here, each of the transactions waiting in the queue gets verified by the cross-checking of their values. Once the transaction is deemed accurate, the transaction is packaged into relevant blocks and entered into the network. Learn more about What is Blockchain Mining?

Consensus

It is the term that symbolizes the agreement of maximum nodes on the network having the same blocks in a validated blockchain. It can be interpreted as a series of rules that each block self-enforces, in harmony. With an increase in the network, the miners and nodes create an overall consensus updating with newer nodes. 

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How is blockchain different from a traditional database?

Any traditional database uses a centralized, client-server network where network administrators control the information. It leads to slower operations and an increased risk of data theft. 

In the case of blockchain, the network remains evenly distributed and decentralized and gets updated and maintained by each node. There is, however, a particular order, including pointers and linked lists, that creates the ease of data flow in a blockchain network. While pointers are variables that store the location of another variable, a linked list is a series of blocks containing valuable data that gets organized with the help of the pointer containing the address of the following block.

When a transaction request comes in a blockchain network, a block waiting in the pool is selected and assigned with the current transaction value. Each node present within the blockchain network receives the block. The nodes and miners validate and verify the blocks. Once verified, the blocks become a part of the blockchain network. And, this completes the transaction.

As mentioned earlier, the blockchain architecture is similar to the ledger. Therefore, it can be organized according to the blockchain design and architecture. In general, there are three kinds of blockchain architecture in use:

• Public blockchain: Open and transparent to all participants, and generally requires time to compute new records.
• Private blockchain: Regulated by a specific group, and therefore, more centralized than others.
• Consortium blockchain: Controlled by a group of enterprises that agrees on regulations and users.

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Creating private blockchain architecture

Consensus algorithm: In a consensus algorithm, a local copy of data available in every node is synced-in and updated. Since the values contained in the nodes are almost identical to each other, the consensus algorithm follows strict network rules. It all adds up to making the blockchain network more stable and secured, as tampering it via a third party would require manipulating all of its blocks.

Putting the architecture together: For a decentralized blockchain application, the developmental design consists of its specifications and functionalities, UX/UI designs, as well as a robust architectural layout. All of this combined will get you to configure the system flow of information between the users and the network. Blockchain network and blockchain code are a few prerequisites for making your architecture. 

Parties involved: Just like blockchain, the solutions developed from the same technology would require a network to function. Therefore, the system can be accessed and viewed by several employees, and therefore would need a transparent picture throughout the process. In the case of industries dealing with risk management, blockchain can prove to be a yielding tool for removing disruptions.

Data sharing: Blockchain technology lets every participant have access to the peer-to-peer network via an in-sync, fixed ledger. The ledger controls all activities taking place inside the system, including mining, refining, and sharing. The Ordering Service protocol monitors and keeps records of every process as and when it takes place. As a shared service, the parties can keep track of things getting ordered, even when there are multiple users. 

Defining code: This is the final step into the process of creating private blockchain architecture for applications. In this stage, participants need to agree upon the transactions taking place inside the network. It also refers to invoking ‘smart contracts’ or terms and conditions that need to be adhered to by all assets, transactions, and participants residing within the network. The TPF (Transactional Processor Function) in JavaScript gets generated for every transaction occurring within the system.

Benefits of blockchain network

• Data encryption: All transactions through blockchain architecture maintain the highest order of trust, validation, and proof for all participants.
• Tamper-proof: Thanks to the transparency, no record can be tampered with.
• Traceable to source of origin: Since every little progress is monitored carefully within the system, any transaction can be easily traced back to its origin.
• Anonymity:  Every node or user has a self-generated address that keeps the true identity of the participant in the blockchain framework protected.
• Transparency: Because of sheer transparency and see-through processes, blockchain self eliminates any chances or threats of corrupting the architecture and undermining the highly influential computation by the systems involved.

Learn more about benefits of blockchain.

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Key Takeaways

The sheer see-through, powerful ability of blockchain technology has already revolutionized the fields of crowdfunding, stock trading, and more. It shall only grow in the coming years because of the evolution of technology with passing time.

There is a rise in careers in blockchain technology and blockchain has tremendously changed the very face of the technology industry forever. If you’re interested to become a blockchain developer and build smart contracts and chain codes, checkout IIIT-B & upGrad’s Advanced certificate program in blockchain technology.