What are the components of the Blockchain Ecosystem?

Blockchain is a decentralizedA system/network that is controlled by multiple entities rather than one. peer-to-peer network. Its primary purpose is to perform transactions in an untrustworthy environment and store the transaction data in an immutableThe data in the ledger can neither be modified nor deleted, this makes the ledger immutable. database.

Components of a blockchain

A blockchain network consists of nodes, a distributed ledger, an asset, and a consensus algorithm. Sometimes, it also includes a virtual machine and a state database.

The components of a blockchain network are explained in detail below.

Nodes

Nodes form the structure of the blockchain network. Nodes on the network are tasked with different responsibilities, such as a minerA node responsible for performing the transaction requested by another node. and a validatorThey are responsible for verifying the validity of the transaction performed by the miner and requested by the other node.. Nodes are devices with computational power and a node application installed. Different blockchains have different node applications containing the data and the rules to act as nodes on the respective blockchain.

Distributed ledger

The distributed ledger is also known as the database of the blockchain. Every node on the network has a copy of the ledger to provide fault toleranceIt is the ability of a system to stay online even after some of the server/nodes crash. to the network. A ledger is immutable and visible to everyone on the blockchain network. It is made up of sequentially linked blocks containing assets. Blocks are linked together using the previous block’s hash.

Asset

An asset can be virtually anything, either physical or non-physical, having a value recognized by the nodes in the network. Some examples of assets are as follows:

• Financial transactions: Blockchains like Bitcoin and Dogecoin use a ledger to store the data of transactions of their cryptocurrencies.

• Code blocks: Blockchains like Ethereum use it to store code in the form of smart contracts, which serves as the basis of the concept of Dapps.

• Medical records: Private blockchains usually store patients’ medical records to maintain integrity in an untrustworthy environment.

• Business transactions: Businesses can use private blockchains while performing transactions involving other businesses to ensure the integrity of the product and that certain conditions are met, leading to more security and accountability.

Consensus algorithm

A consensus algorithm is what makes blockchain a successful alternative for centralized applications. In the case of centralized applications, the central authority is trusted by all users to execute the transactions reliably. However, in the absence of a central authority, this responsibility falls upon the nodes in the network. Blockchains use consensus algorithms like Proof of Work (POW) and Proof of Stake (POS) to reach consensus in an untrustworthy environment. The consensus algorithm sends the transaction performed by the miner to the validator nodes to reach a consensus. If consensus is reached, the transaction is added to the ledger, or else it is discarded.

Virtual machine

Blockchains like Ethereum run virtual machines on their nodes. They are used to execute code written in smart contractsSmart contracts contains code written in solidity language. They are present on all the nodes of the network ready to execute a certain portion code when the specified conditions are met.. This is done to ensure that if the code being executed on the nodes contains malware, it will not affect the node executing the code. Instead, it will just affect the virtual machine running on top of the actual hardware saving the node.

State Database

It is a key-value databaseKey-value databases are nonrelational databases which store specific data against a specific key. This decreases the retrieval time of data. that represents the current state of the network. It is calculated by traversing the ledger. It is used to save time during transactions, as during every transaction, the updated state of the network is required, and the traversal of the whole ledger in every transaction will slow down the network.