Blockchain is actually a distributed ledger technology above everything else and keeps records. The distributed ledger is accessible to all network participants, but without any room for modification. However, an understanding of the components of the blockchain ecosystem beyond the identity of network participants could generate a better impression of the ecosystem. Node application is one of the first additions among the components of the blockchain ecosystem.
It is a particular application that every computer connected to the Internet must download in order to participate in a blockchain ecosystem. After the installation of the node application, a user becomes a participant in the blockchain network. For example, if you consider bitcoin as a blockchain ecosystem, every computer connected to the Internet should run a Bitcoin wallet application to participate in the blockchain network. Similarly, another example of a blockchain ecosystem, Bankchain, shows how banks only get permission to run the node ecosystem.
This is in stark contrast to the Bitcoin ecosystem, where anyone could guarantee the download and installation of the node application to participate in the network. In technical terms, the blockchain ecosystem follows the design and rules of a service overlay network or SON. Therefore, blockchain components such as node applications must follow certain conditions. The computer must present an application that can influence the shared state on the service overlay network.
Only then could I classify it as a node in the network in question. The next addition among the logical components of the blockchain ecosystem would obviously point to the distributed ledger. Before we delve into the meaning of the distributed ledger, let's focus on the definition of a ledger. A ledger actually refers to any file, usually computer files, that document each user's data and transactions.
So, the distributed ledger is basically a ledger that you can find distributed across all nodes in the network. It is a shared database that is replicated and synchronized across all peers in the network. However, the most striking feature of this answer to “what are the components of the blockchain” concerns decentralization. Once all nodes in the network agree on the accuracy of the transaction, the nodes will update their existing ledger with the new copy.
Interestingly, every record in the distributed ledger comes with a timestamp and a unique cryptographic signature. As a result, you can ensure better traceability along with general ledger security against unauthorized tampering. Another dominant addition among the key elements of the blockchain ecosystem would obviously concern consensus algorithms. Blockchain technology is based on the claim of fully verified and highly secure transactions.
While many would quickly assume that decentralization helps deliver this advantage, the actual actors responsible for verifying transactions are consensus algorithms. Consensus algorithms are basic processes in computer science that can help achieve agreement on certain issues among distributed systems. The role of consensus algorithms in the blockchain ecosystem is largely focused on achieving reliability in a multi-node blockchain network. As a result, you can ensure that all incoming blocks on the network have been verified and offer security.
Most important of all, you can find several consensus algorithms to define one of the crucial components of the blockchain. Here are the different types of consensus algorithms you might encounter in a blockchain ecosystem: the proof-of-work consensus algorithm is probably one of the first implementations of a consensus algorithm. It is an extremely functional tool among the components of the blockchain ecosystem for processing blocks and adding them to the network. The accuracy of a block is important to ensure its incorporation into the network.
Therefore, the process of developing the right tests to add a block to the ecosystem is known as mining. Therefore, adding a block to the blockchain requires miners to solve cryptographic puzzles in the Proof of Work algorithm. Another notable consensus algorithm that has evolved from Proof of Work concerns the Proof of Stake algorithm. The Proof of Stake algorithm is one of the key elements of the blockchain ecosystem, especially considering its radically growing popularity.
In this algorithm, the participants capable of generating blocks are selected according to specific criteria set out in the algorithm. The ability to select a validator depends considerably on its computing power and the number of coins. Therefore, users who have held coins for longer periods are more likely to take on the role of validators according to the Proof of Stake algorithm. The final addition between the logical components of the blockchain ecosystem points to the virtual machine.
The deployment of virtual machines or VMs in the blockchain ecosystem occurs together with the node application. It is important to note that the virtual machine is basically a virtual representation of a real computer with related resources. One of the notable mentions of virtual machines as components of the blockchain ecosystem is evident in the Ethereum blockchain ecosystem. The Ethereum virtual machine or EVM, which resides in the node application, shows the perfect example of a VM component in blockchain ecosystems.
These four components make up the blockchain network. It also has more components, but the other parts ultimately fall into these four categories. So, let's dive into each topic and understand what it is and what it does. In a sense, it is the blockchain itself, it is the ledger that is shared throughout the chain in which the blocks are added.
If you compare it to the example of Distributed Ledger we gave in episode 1, it's that notebook in which every member of the village had to update any transactions that took place in the village. A node application is a specific application in which every computer connected to the Internet must be downloaded and installed if it wants to participate in the blockchain ecosystem. This is changing and now specialized technology companies are providing blockchain tracking services, making cryptocurrency exchanges, law enforcement and banks more aware of what is happening with crypto funds and exchanges. In the case of Bitcoin as an ecosystem, each computer must run a Bitcoin wallet application to be part of the blockchain network.
Over the years, blockchain technology has grown from being a mere cryptocurrency base to serving large ecosystems for various industry use cases. To speed up transactions, a set of rules called a smart contract is stored on the blockchain and executed automatically. To distinguish between open blockchains and other peer-to-peer decentralized database applications that are not open ad hoc computing clusters, the terminology Distributed Ledger (DLT) is commonly used for private blockchains. EVM could show how valuable the components of the blockchain ecosystem are for understanding the instructions for managing the states of digital smart contracts.
Blockchains are usually built to add the score of new blocks to old blocks and are given incentives to extend with new blocks instead of overwriting old blocks. Therefore, the process of generating correct tests (blocks) to add a block to the Blockchain is known as mining. Diego, a blockchain enthusiast, who is willing to share all his learning and knowledge about blockchain technology with the public. Some of the largest and most well-known public blockchains are the bitcoin blockchain and the Ethereum blockchain.
As a result, interest in learning about the components of the blockchain ecosystem has grown exponentially in recent times. . .