What is Blockchain Architecture and How It Works?

17-Oct-2022

While the term blockchain came about way back in the 90s, its technique broadly came to be used with the invention of blockchain-based cryptocurrencies, particularly Bitcoin.

Decentralization, accountability, and security are the three main tenets of blockchain technology. This method can cut costs dramatically while increasing operational effectiveness. Applications created on blockchain architecture will continue to be in demand and used. Therefore, now is the ideal opportunity to learn more about this subject.

So What is Blockchain Architecture?

A blockchain can be logically defined as a network of blocks that are linked together and carry specific information (database) in a secure and real manner (peer-to-peer). In other words, blockchain is a collection of interconnected computers rather than a single, centralized server, making the entire network decentralized.

What is Blockchain architecture

You might remember the times when working on a google doc, participants would pass around documents and wait for others to make the necessary adjustments. Working on the same document at the same time is now possible with Blockchain.

Instead of being copied, digital information may now be spread thanks to blockchain technology. This distributed ledger offers openness, confidence, and security.

The banking sector is making extensive use of blockchain architecture. Today, however, this technology aids in the creation of software development solutions for smart contracts, digital notaries, cryptocurrency record keeping, and several other industries.

Understanding Blockchain Architecture

Let us discuss the crucial components that makeup Blockchain Architecture.

Blockchain Architecture essentially includes the following:

Transaction
Block
P2P Network
Consensus Algorithm

Transaction:

The smallest units that make up a blockchain system are transactions. They typically include a value, a recipient address, and a sender address. It resembles a typical credit card statement in many ways. By digitally signing the hash created by fusing together the previous transaction and the recipient's public key, the owner transfers value.

Following the transaction's public announcement to the network, each node separately maintains a copy of the blockchain, and the current known "state" is determined by processing each transaction in the blockchain's chronological order. Every node receives a block consisting of the transaction data. The network distributes new transactions, which each node independently verifies and "processes" as they go throughout the system. Every transaction has a timestamp and is gathered in a block.

Block:

Block is made up of transactions and block header information. Blocks are data structures that serve as containers for groups of transactions and are replicated across all network nodes. Miners build blocks in the blockchain. Making a legitimate block that the rest of the network will accept is called mining. The pending transactions are collected by nodes, who then confirm their cryptographical correctness before putting them together into blocks to be stored on the blockchain. The Block header is the metadata that aids in confirming a block's validity. Transactions are found in a block's remaining space. Depending on the miner's preference, a block may include any number of transactions.

Variety of Blocks:

Blocks may be categorized into three:

Major branch blocks: The majority of blocks merely add to the main blockchain, which is now the longest chain in the network.
Side branch blocks: This is a parent block that is not at the longest blockchain is referred to in some blocks.
Orphan Blocks: Some blocks refer to a parent block that the node handling the block is unaware of.

P2P Network:

This is a Peer-to-peer (P2P) network based on the IP protocol. It is a flat topology with no centralized nodes. While working together using a consensus process, all nodes equally provide and can consume services. Peers contribute to the storage and computational resources needed for network maintenance. P2P networks are typically more secure than centralized networks because they lack a single point of vulnerability.

The participants in a private blockchain must be pre-verified, and they are often parties who are familiar with one another. Every network node in a typical blockchain design keeps a local copy of the blockchain. The P2P network on which blockchain design is based is solely responsible for its decentralization.

Consensus Algorithm:

A consensus method is responsible for synchronizing all of these copies of a single ledger. The consensus process makes sure that the local copies that each party has been the most current and consistent with one another. Each node has a copy that is identical or comparable to one other. One could argue that the consensus algorithm serves as the fundamental building element of every blockchain architecture.

Below are a few of the types of Consensus Algorithms.

Proof-of-work (POW)
Proof-of-Stake (POS)
Simplified Byzantine Fault Tolerance (SBFT)

Those are the crucial elements of blockchain architecture. Given its popularity and the scope it offers, it may be as well a promising career prospect. A blockchain architect's salary normally varies from place to place or the company in which the professional is engaged. The average blockchain architect salary in India is approximately INR 143376 annually, while in the US, it is USD 165750.

The role of a Blockchain Architect is in high demand as blockchain technology rises its significance in major industries like Banking and Finance, Health and Medicine, and several others. Now may be the ideal time to pursue good training in Blockchain development if you are enthused by the prospect.