Episode 3: Logical components of Blockchain Ecosystem

If you are reading this episode, then I assume that either u have already read my earlier two blogs on “Definition of Blockchains” and “Type of Blockchains”, or your already know about the same. ( in case u haven’t, please click on the links to go through).

In this particular episode, we will talk more about the “Logical components of the Blockchain Ecosystem”.

There are typically four main components of any blockchain ecosystem:

1.      A node application/machine

2.      A shared ledger (The blockchain itself)

3.      A consensus algorithm

4.      A virtual machine

1.      Node Application/Machine

This is typically the computer from which anyone accesses the blockchain. This typically comprises of a internet connected computer/or mobile phone, with an application (app) loaded on the same. This is like a gateway to the blockchain ecosystem. (in a very very layman’s language, something like what Google chrome or internet explorer is the gateway to internet). It can be said as the hands and legs of the blockchain Don’t worry if u don’t understand it now. We will try to understand the same better using an example.

2.      Shared Ledger

It is in a sense the blockchain itself, it is the ledger which is shared across the chain in which the blocks are added. If you compare it with the Distributed Ledger example we gave in Episode 1, its that notebook which every village personal had to update any transaction that took place in the village.

It is probably the heart of the blockchain.

3.      Consensus Algorithm

The consensus algorithm is probably the most important component of the blockchain. It can also be called as the “Brain” of the chain. It provides the ‘rules of the game’ for how the ecosystem will arrive at the approval or rejection of any particular transaction. For example, again taking example of the property exchange from Episode 1, of Mr Z buying property from Mr Y, if one of the condition of the approval of transaction is that Mr Z needs to have a particular credit score for the transaction to pass. Unfortunately, Mr Z’s credit score was lower than the cutoff, so the consensus algorithm will reject. Or the banker of Mr.Y can also reject the transaction because there is some loan pending on the property.

(Fun Question: Can anyone tell which type of blockchain is it? Public, Private or Federated! Please write your answer in comments section below.)

There are many types of consensus algorithm, few main are listed below (details of which we will discuss more in Episode 7, when we talk about Smart Contracts. Till then if u are interested read : https://medium.com/the-daily-bit/9-types-of-consensus-mechanisms-that-you-didnt-know-about-49ec365179da )

·        “Proof of work”

·        “Proof of capacity”

·        “Proof of stake” or “Proof of delegated stake”

·        “Proof of burn”

·        “Proof of elapsed time”

·        “Proof of authority”

4.      Virtual Machine

The virtual machine is the final logical component in the blockchain. This is where the entire blockchain runs. Since these are usually based out of cloud computers, these are known as virtual machines There are various platforms on which blockchains can be designed. We will talk about them in our next episode.

Lets not try to understand all the components taking “our contract example” further ( above figure). My Y wants to buy property from Mr X, so they will have a legal contract made ( lets not confuse between legal contract and smart contract, both of them are absolutely two different things ,we will talk about smart contract in episode 7).

The Node Application : Now the computer and software that Mr X uses to interact with Blockchain will be the Node application ( like a bitcoin wallet in case of bitcoins, like any other banking application).

 The Contract (in digital form) will be the block of information.

The Virtual machine:- It is the shared with all the other nodes and the miners by the use of Virtual machine.

Consensus algorithm :- When everyone on the basis of set rules, approve ( or disapprove) transaction.

Shared Ledger: If approved, the block is then added to the blockchain, and the ledgers across the network are updated.

Hopefully u found the Episode also as interesting as the previous two. In my next episode I will be discussion on the different platforms available for blockchains and how to choose the best for you’re your use. 

 In my next few blogs I would cover:-

Episode1 : Basics of Blockchain

Episode 2 : Types of Blockchains

Episode 4: Platforms of Blockchain and how to choose whats best for you?

Episode 5: Test cases of blockchain in general

Episode 6: Test cases of block chain in Supply chain and Logistics

Episode 7 : Smart contracts and its usage