Blockchain is a distributed and decentralized digital ledger that allows transactions to be recorded, verified, and shared securely among a network of computers. Blockchain architecture is the design structure of a peer-to-peer (P2P) network of computers that serves as a backend for applications and systems. This network is built to function as a unit (virtual machine) even though there is no central authority to manage the interaction among the nodes. There are four primary types of blockchain architectures: public, private, consortium, and hybrid.
A public blockchain architecture allows anyone to set up a node and become part of the P2P network without seeking permission from anyone. In contrast, a private blockchain is owned and controlled by an individual or organization, allowing the owner to customize it as much as they want. A consortium blockchain architecture is a collaboration of many entities that own shares in the company that oversees its operations. Lastly, a hybrid blockchain architecture is a combination of both public and private blockchains.
Blockchain technology can benefit businesses in several ways. For example, it can improve transparency, reduce costs, increase efficiency, and enhance security. One industry that has already started using blockchain technology is the supply chain industry. Companies like Walmart are using blockchain to track the movement of goods from suppliers to stores, reducing the time it takes to track down the source of contaminated food in the event of a recall. Similarly, the financial services industry is exploring blockchain to streamline the process of transferring funds across borders, reducing transaction costs and speeding up settlement times.
The core components of blockchain architecture include nodes, transactions, blocks, chains, miners, consensus protocols, and public and private keys. Nodes are computers on the peer-to-peer network that update the shared ledger, store the ledger, and relay data to other nodes on the network. Transactions are entries on the shared ledger of the blockchain, while blocks are clusters or batches of transactions that the peer-to-peer network processes and approves simultaneously. Chains are chains of blocks linked from the first-ever to the current one. Miners are nodes that perform functions for the network and earn rewards. Consensus protocol is a set of rules that guide the computers on the network to interact and form a consensus on how transactions are processed and stored. Lastly, public and private keys are used to secure data on the shared ledger. Public and private keys are an essential part of this cryptographic process. Public keys are used to identify users or entities on the blockchain network. They are publicly visible and can be shared with others. Private keys, on the other hand, are kept secret and are used to sign transactions or smart contracts to prove ownership and authorization.
When a transaction is initiated, it is signed with the private key of the sender and broadcasted to the network. The transaction is then verified by other nodes using the sender's public key, and if the transaction is valid, it is added to a block and added to the blockchain. Be sure to look at Business Anthropology's Blog and the Cryptocurrency Crash Course's Blog for more educational and empowering articles created by Anthony Galima in an effort to enrich your life and livelihood.