Blockchain development is a complex and costly process that requires a highly skilled team with expertise in this area. In previous articles we talked about choosing a consensus algorithm and platform for blockchain development. Today, let's review the features of the blockchain architecture and what tasks it performs.

The technical definition of blockchain: operation and principles

The term blockchain first appeared in 1991. A group of researchers described a technology that created digital tags for documents so that they could not be tampered with, altered or dated retroactively. But the main spread of the technology came in 2008, when Satoshi Nakamoto used it to create Bitcoin.

Blockchain in today's definition is a distributed, public database. Blockchain differs from a traditional database in that it has no central server. The architecture of traditional databases is based on the client-server principle. That is, all information is stored on one computer and is controlled by an administrator.

Blockchain is a technology with a decentralized architecture that links participants' computers to each other and does not require a central authority. That is, it is not one administrator who confirms and updates the records, but each participant in the network.

The structure of a blockchain includes two important components:

Pointers are variables that store information about the other variables.
Linked lists are a chain with blocks, each containing specific data.

Another feature of blockchain is the immutability of data. For better understanding of how the immutability effect is achieved, consider the structure of a block.

A block consists of three components:

Certain data. The information that is stored inside the block. The nature of this information depends on the type of blockchain. For example, a Bitcoin blockchain stores information about the details of a transaction: the sender's address, the recipient's address, and the number of coins.
The hash of the current block. An alphanumeric code that identifies the current block. The hash is always unique and cannot be duplicated.
The hash of the previous block. The unique alphanumeric code of the previous block, which creates the blockchain.

It is the hash that ensures the immutability of the block. That is, after block creation, miners calculate its code and confirm the transaction, after which the information in the block cannot be changed. Changing any information in the block causes the hash to change, which will make subsequent blocks invalid.

For example, there is a chain of five blocks:

The first block (genesis block) contains information about the transaction and its hash. It cannot contain the hash of the previous block, since it is the first block.
The second block contains its hash and the hash of the first block.
The third block contains its hash and hash of the second block.
The fourth block contains its hash and hash of the third block.
The fifth contains its hash and the hash of the fourth block.

If an attacker tries to modify the data of the second block, the third block will be invalid because it already contains validated information. Consequently, subsequent blocks that also store that information will be invalid as well. But even the uniqueness of hashes and subsequent replacement of blocks does not provide maximum security for the data.

Why is this so? The power of modern computers can compute thousands of hashes and then tamper with the right block and recalculate the hashes of all subsequent blocks. To avoid this, blockchain is designed on a specific consensus algorithm.

For example, PoW or PoS, which slow down the block mining process. To forge the hash of one block, you would need to recalculate the hashes of all the blocks in the network. But since block validation requires the consent of all members of the network, the attacker would have to take over 50% of the network's power. Only then will the modified block be accepted by the other nodes. But this is only possible in theory, and no one has ever managed to take possession of more than 50% of the power up to this point.

Blockchain Tasks

The main task of a blockchain is to receive and process transactions from users. Therefore, before developing a blockchain network, it is necessary to choose the best type of transactions for the business.

Transactions with limited functionality, fast processing and no cryptographic calculations. They can change several balances at once, storing a large amount of data in storage.
Complex transactions that perform cryptographic calculations, burdening the computer's processor.

In addition to performing transactions, blockchain performs the following business-critical tasks:

Protection of anonymity. Banks and payment systems have full information about transaction amounts, senders, and recipients. In blockchain, this data is hidden, and you only need to know the public and private keys to conduct transactions.
Smooth operation. In the case of centralized systems, if the main server goes down, the entire network is unavailable. Blockchain works all the time.
Transaction transparency. The use of smart contracts eliminates the need for intermediaries and allows you to openly program the terms of the transaction.

Blockchain limitations

In addition to the benefits, the implementation of blockchain brings with it certain limitations of technology. Therefore, it is very important to think carefully about the approach and assess the available resources before starting development.

Scalability issue. The speed of transactions depends on the workload of the network. That is, the more participants in the network, the slower the speed is.
The problem of implementation. The initial financial investment for blockchain development can be huge. While most existing solutions are free, hiring experienced programmers is a significant investment.
The shortage of talent in the marketplace. Every year, the need for highly skilled blockchain developers increases by 300-500%. Because of this, it can take a long time to find a particular specialist.
Difficulties with private keys. In decentralized applications, private keys are a vulnerability. They are created during wallet registration and provide access to all stored data. If stolen, this puts both sensitive data and finances at risk. If lost, access to the wallet is lost forever.
High power consumption. Most blockchain-based solutions, such as Bitcoin, use the Proof-of-Work consensus algorithm. It uses excessive processing power, and with the resources needed to cool the hardware, prices only go up. Thus, if the PoW algorithm is the only option, we will have to put up with the energy costs.

Blockchain architecture design and its business benefits

Blockchain has a distributed database architecture that any user can join (if it is not a private blockchain) and act as an administrator.

The blockchain architecture consists of 6 main components.

Node. A computer that hosts a copy of the entire blockchain network.
Transaction. A record of data that has been verified and validated by members of the network.
Blockchain. A data structure that stores the hash of the current and previous block, as well as information about the transaction.
Chain. A sequence of blocks in a particular order.
Miners. Nodes that verify blocks before adding them to the blockchain.
Consensus algorithm. A set of rules and conventions for performing transactions in a blockchain.

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