Blockchain has gradually turned from a fancy buzzword into a powerful technology that businesses of every scale are trying to incorporate. It isn’t surprising due to all the benefits blockchain offers, among which there are decentralization, elimination of mediators, security, and accuracy.
Wonder how blockchain architecture works? You are in the right place to learn the basics.
What is Blockchain?
Most people think of blockchain as of technology behind Bitcoin. It is a decentralized system that validates transactions by means of a network of computers. Blockchain technology creates and shares the distributed ledger so that transactions and their verification can happen without delays and intermediaries.
Generally speaking, blockchain is a mesh network of interconnected computers that rely on one another rather than on a central server. Simply put, blockchain is a diary that is hardly possible to fake.
Purpose of Blockchain
Everything that happens on the blockchain happens in transactions. A transaction is the smallest building block of the blockchain. A transaction consists of the address of the sender and recipient and the value. It pretty much has the same information a regular bank transaction includes. Yet, there is no third-party involved in this case. A blockchain transaction carries the value from the sender to the recipient on its own.
How is a Blockchain Transaction Verified?
When a blockchain transaction is initiated, it gets delivered to every node in the blockchain system in the form of blocks. A block is a data structure that bundles sets of transactions so that they can be shared to the nodes in the blockchain system. Next, each of the nodes verifies and processes the transaction.
Where Can Blockchain Be Used?
One of the most promising tandems is blockchain and healthcare. This industry suffers from outdated technologies, processes and poor data management on a global level. We’re excited to see how blockchain healthcare projects like doc.ai and Patientory can take it to the next level in the future.
Apart from healthcare, many other industries are also working on implementing the blockchain architecture for their benefit. Currently, there are projects that combine blockchain and finances, education, politics, public services, real estate and more.
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How Blockchain Architecture Works
Blockchain structure consists of the following elements:
- Nodes in a peer-to-peer network
- Block properties and genesis block
- Transactions in the ledger
- Transaction validation process
- The agreement in the blockchain
The blockchain system is always secure and decentralized. It makes tracing every step of every transaction much easier than following the path of a paper dollar. With blockchain, funds cannot disappear into the blue without a trace.
The blockchain architecture can be either public or private. In a public blockchain architecture, all the nodes are anonymous. Anyone who wants to participate can access the system and the data in it. This way, a public blockchain is permissionless.
A private blockchain architecture is controlled by a certain group of people (an organization, an authority or a corporation). In this system, members receive permissions to participate in certain transactions.
Public and private blockchains can be open and closed. A public open blockchain can be used for betting, video gaming, and currencies, whereas a public closed blockchain can be used for voting, recording the votes, and whistleblowing. Private open blockchains can be used for financial and government records, corporate finances, and supply chain. A private closed blockchain, in turn, can be used for tax returns, military and law enforcement processes, defense and construction.
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To sum up, blockchain is a linearly built and distributed data structure system that is independently verified by all the members of the network.
Benefits that blockchain offers have the potential to change the world a lot. It could significantly reduce the losses of transactions, improve data protection and transparency, and increase the efficiency of different industries. This innovative technology is still quite young to draw any conclusions yet. So we have to keep the weather eye open and be ready to get the most of it.