Basic Components of Blockchain: What You Need to Know

Blockchain – historical review

The idea of blockchain technology was described as early as 1991 when research scientists Stuart Haber and W. Scott Stornetta implemented a computational-practical solution for timestamped digital documents so that they could not be backdated or forged.

The system used a cryptographically secured chain of blocks to store timestamped documents, and in 1992 Merkle trees were included in the development, making it more efficient by allowing multiple copies to be collected into a single block. However, this technology was not used, and the patent was lost in 2004, four years before the creation of Bitcoin.

At the end of 2008, a white paper representing a decentralized peer-to-peer (P2P) electronic money system called Bitcoin cryptography was sent out by a mailing list by a person or group using the pseudonym Satoshi Nakamoto.

The one who now hides under the world-famous pseudonym Satoshi Nakamoto was well aware that the banking system of the 1980s had lagged behind the technological revolution. Banks have created centralized organizations that store transaction records, control interactions, provide trust and security, and regulate the entire system. Satoshi invented a cryptocurrency called bitcoin, which is based on the Blockchain. Bitcoin is just a particular use case for the Blockchain, which considers the inherent vulnerability of trust-based models.

What is a blockchain?

Blockchain is a decentralized distributed database. The database consists of data blocks generated using cryptographic techniques in an ordered channel. The blocks contain information about the data record created during a specific period, which cannot be tampered with.

The block contains the data records, the hash of the current root block, the hash of the previous root block, a timestamp, and other information. The data record type can be defined according to the scenario, such as asset transaction and issuance records.

In terms of value, Blockchain is the Internet of Value used to deliver value. The existing Internet is an informational Internet that transmits information based on the TCP/IP protocol.

Blockchain technology has become widespread due to openness, the immutability of stored data, decentralization, and the ability to make decisions in an untrusted environment between equal network participants without the participation of intermediaries. The first implementation of blockchain technology was created as part of the Bitcoin cryptocurrency project.

Blockchain includes five main components:

  1. Nodes are devices included in the blockchain network. The main task of the nodes is to maintain the network, distribute and store copies of the Blockchain, and sometimes process transactions.
  2. A consensus mechanism is a protocol that allows you to reach an agreement between equal participants in a decentralized network. There are many protocol implementations, but the most popular ones are PoW, PoS, dPos, aBFT, and dBFT.
  3. A virtual machine is a software system that emulates the operation of a distributed decentralized blockchain platform that executes decentralized applications and smart contracts.
  4. A blockchain is a data structure built by sequentially combining blocks into a chain. All blocks are strictly sequential (due to storing the hash value from the previous block); they are denoted by continuous numbering, in which the child block always refers to only one parent block.
  5. A distributed registry is an electronic database system distributed among several network nodes or devices.
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These components closely interact with each other and play an essential role in the blockchain ecosystem.

There are also additional add-ons for blockchain networks that do not affect the internal architecture of the technology but can significantly expand its functionality. These include mechanisms that provide increased speed and improved confidentiality of transactions, means for off-chain transactions, modules that protect against attacks made using quantum computers, etc.

Types of Blockchain

  1. Public blockchain networks

Any user can join a public blockchain network (Bitcoin). The disadvantages of such a network include high requirements for computing power, low level of transaction confidentiality, and weak security. These criteria are essential when using Blockchain in enterprise environments.

      2. Private blockchain networks

A private blockchain network, like a public blockchain network, is a decentralized peer-to-peer network, with the essential difference that the web is managed by one organization. This organization determines who can join the network, run the consensus algorithm, and administer the shared ledger.

Depending on the use case, this approach can significantly increase the reliability and reliability of information transmitted between participants. A private blockchain network can be behind a corporate firewall or even on-premises.

      3. Exclusive blockchain networks

Companies opting for a private blockchain tend to set up an exclusive network. It is important to note that public blockchain networks can also be complete.

This imposes certain restrictions on the circle of persons allowed to participate in the network or only in certain transactions. To join the web, a member must receive an invitation or permission.

      4. Blockchain Consortium

Responsibility for the administration of the Blockchain may lie with several organizations. These pre-selected organizations establish access rights to perform transactions or access data.

A blockchain consortium is an ideal solution for companies where all participants have permissions and are collectively responsible for the Blockchain.

Basic concepts of Blockchain


A transaction is a transfer of value between two parties on a blockchain network. This can include the transfer of cryptocurrency, the execution of a smart contract, or the recording data on the Blockchain. Each transaction is verified and added to a block, which is then added to the chain. Transactions are typically recorded in a public ledger and can be viewed by anyone on the network. The transactions are also secured by cryptography, and they cannot be altered once added to the Blockchain.


A block is a collection of verified transactions on a blockchain network. Each block contains a certain number of transactions and a unique code called a “hash” that links it to the previous block in the chain. Once a block is added to the chain, the transactions it contains are considered to be confirmed and cannot be altered.

When a block is mined, it is added to the end of the chain, hence the name “blockchain.” Each block also contains a timestamp, which records the time the block was added to the chain. The blocks are linked in chronological order and create an unbroken chain of transaction history from the first block, also known as the Genesis block.

This structure ensures that the integrity of the transaction history is maintained and that past transactions cannot be altered. This is a critical feature that makes blockchain technology secure and transparent.

Block header

A block header is a component of a block in a blockchain that contains metadata about the block. It typically includes the following information:

  1. The block’s unique code or “hash.”
  2. The hash of the previous block in the chain is also known as the “previous block hash.”
  3. The timestamp of when the block was created
  4. The “nonce,” a value that is used in the process of mining a block
  5. The difficulty target, which is used to adjust the difficulty of the mining process
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The block header is used to verify the integrity of the block and link it to the previous block in the chain. The last block’s hash is included in the block header of each new block, which creates the link between blocks and ensures the integrity of the Blockchain.

A nonce is a random number added to the block header and used in the mining process to find a solution to a complex mathematical problem. When a miner finds the answer, it is added to the block header, and the block is considered mine.

The difficulty target is used to adjust the difficulty of the mining process to ensure that blocks are mined at a consistent rate. The problem is adjusted by changing the target hash value that the miner must find.

In summary, the block header is an essential component of a block that contains important information that is used to verify the integrity of the league and link it to the previous block in the chain and the mining process.


A chain in the context of blockchain technology refers to a series of linked blocks. Each block contains a group of verified transactions and a unique code called a “hash” that connects it to the previous block in the chain. This creates a chronological chain of transaction history maintained by a decentralized network of computers, also known as nodes.

The chain is maintained by a consensus mechanism that ensures that all nodes on the network agree on the current state of the Blockchain. This mechanism ensures that the integrity of the transaction history is maintained and that past transactions cannot be altered. This structure makes blockchain technology secure, transparent, and tamper-proof.

One of the key features of blockchain technology is that it creates a decentralized, public ledger of all transactions that have taken place on the network. This ledger is stored on every node in the network, so it is distributed across the web and not controlled by a single entity. This ensures that the data stored on the Blockchain is transparent and cannot be altered.

The chain is also essential for the mining process, as the miner has to solve the mathematical problem to add the new block to the chain. The miner who solves the problem first adds the block to the chain. The blocks are added to the chain in a linear, chronological order and create an unbroken chain of transaction history from the first block, also known as the Genesis block.

Benefits of Blockchain

  1. Decentralization. Most traditional forms of payment are centralized and have weaknesses such as storing data in one place, which makes them vulnerable to damage and easy targets for hacker attacks. In Blockchain technology, information is not stored in just one place. Everyone on the network owns the data and has access to the transaction history but cannot change it.
  2. Immutability. Once something is entered into the Blockchain, it cannot be tampered with. This is because the underlying technology uses cryptographic hashes.
  3. Transparency. Blockchain offers a high level of transparency and privacy at the same time. The user’s identity is hidden behind complex cryptography and can only be identified by their public address. At the same time, while the user’s identity is protected, you can still see all the transactions made at his public address.
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Areas of applications of Blockchain

  1. Banking Distributed registers can make data exchange in the financial ecosystem more accurate, secure, and resistant to hacking.
  2. Messaging Telegram is currently developing its Blockchain called TON (Telegram Open Network), which will allow it to expand the range of services provided to two hundred million users of this messenger by adding the possibility of payments, file storage, and protection from censorship.
  3. Hedge fund Startup Numerai, in which such well-known investors as First Round Capital and Union Square Ventures have invested, hires traders and analysts (Quants) and decentralizes the hedge fund work model.
  4. In the future, Blockchain can serve as an infrastructural basis for collecting votes, tracking and calculating final election results, and leveling fraud and fraud. In such a future, there will be no need to recount votes again.
  5. Identity on the Internet DNS Platforms like Blockstack and uPort is building a future in which a “digital identity,” or identifier, will accompany the user in any of his activities on the global network.
  6. Protection of critical infrastructure Along with the spread of Blockchain, the possibility of hacking will disappear because the security organized with this technology is much higher than in the systems of the previous generation.
  7. Services for shared rides (Ride Sharing) based on the distributed registry, it is possible to create a more convenient marketplace for drivers and passengers, in which they could agree on the price themselves.
  8. Internet advertising Users can receive less advertising, but more precisely targeted to their interests, and advertisers – more complete and reliable data about their purchases.
  9. Cryptocurrency exchanges Another area where Blockchain reduces cyber threat risks is eliminating the need for human involvement in a transaction—the human net — the net of hackers, corrupt persons, and human errors.
  10. Education Implementation of the Blockchain in the educational process will speed up the verification procedure and eliminate or reduce fraud risks by fraudsters who try to pass themselves off as holders of diplomas and scientific regalia.

Conclusion – perspectives development of blockchain technologies

In a few years, Blockchain has gone from an unknown technological novelty to an indispensable tool already used at the state level, even in the political sphere.

The distributed ledger is used by banks and large corporations, which simplifies and lowers the cost of daily financial operations. Fields of blockchain implementation in the future will be the most diverse: from elections and voting to charities and art. After all, no one doubts the practical application of technology based on a secure blockchain.

Why is blockchain technology considered the technology of the future? We use the world wide web daily for quick and easy information exchange. But when it comes to transferring valuables (money), we still have to resort to the services of traditional banks.

Yes, there are now convenient payment methods over the Internet, the same PayPal, but they still require integration with a bank account or credit card.

Blockchain takes on functions that the traditional financial services sector has always played: registration of transactions, confirmation of identities, and conclusion of contracts. At the same time, the efficiency of such services is significantly increased.