The Building Blocks of Blockchain Technology

The Building Blocks of Blockchain Technology

Blockchain is composed of several core components that enable its functionality as a decentralized, distributed ledger. While the specifics vary across different blockchain implementations, the following are some of the key elements

Addresses –

Addresses are unique identifiers that designate the recipients of transactions on a blockchain network. They are derived from the public key part of a public/private key pair. Addresses are hashes of public keys. Using a new address for each transaction improves privacy.

Transactions –

Transactions are the most basic building blocks of a blockchain. A transaction represents a transfer of value from one address (sender) to another (recipient). It contains metadata like the transaction ID, input addresses, output addresses, value transferred, and more.

Blocks –

Blocks group transactions together with other metadata and link to previous blocks to form the blockchain ledger. This bundles transactions for efficiency and gives an ordering. Blocks include a timestamp, nonce, reference to previous block hash, and transaction data.

Peer-to-peer network –

This is the network topology used by blockchains. It allows the nodes that participate in the network to directly communicate with each other to transmit transaction data and blocks, rather than through a centralized server.

Consensus mechanism –

This is the algorithm that nodes follow to agree on the correct state of the blockchain before new transactions can be added. It ensures agreement in a decentralized network. Common mechanisms are proof-of-work, proof-of-stake, and practical Byzantine fault tolerance.

Nodes –

Nodes are the computing systems operated by peers that run the blockchain software to maintain the decentralized ledger. There are different types of nodes like miners, validators, full nodes etc. with different responsibilities.

Smart contracts –

These are programs deployed on a blockchain that execute automatically when predefined conditions are fulfilled. They enable advanced workflows and business logic to be encoded on the blockchain.

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