The blockchain architecture could replace the centralized server-based architecture in many systems. That is because blockchain in many use cases offers more security, stability, and privacy.
Also, with the immutability, transparency, and cryptography characteristics, it supports applications and digital assets that centralized server backends cannot. Examples of such applications include immutable smart contracts and sovereign (independent) non-fungible tokens (NFTs).
Blockchain architecture is the design structure of a peer-to-peer (P2P) network of computers that serves as a backend for applications and systems. This network is built to function as a unit (virtual machine) even though there is no central authority to manage the interaction among the nodes.
There are four primary types of blockchain architectures.
In the public blockchain architecture, anyone can set up a node and become part of the P2P network without seeking permission from anyone.
Also, those who join the network often remain pseudonymous. Nevertheless, the public blockchain architecture incentivizes stakeholders to act honestly through mining or staking rewards and opportunity costs.
The advantage of public blockchain architecture is that they offer more security since they are highly decentralized. The downside is that they can be rigid, and upgrades often face contentious governance processes.
In this case, a person, business, or an institution owns and controls all the nodes on the P2P network. In such a setting, only the blockchain owner can allow another person or entity to join the network.
The advantage of a private blockchain is that the owner can customize it to the extent they want. Also, upgrades are easy to implement as there are few stakeholders to persuade.
On the other hand, private blockchains are the least secure and more likely to have censorship. That is because there is a central authority that can be compromised. Also, they are not immutable as the owner can easily change the rules.
A consortium blockchain architecture is a collaboration of many entities. Each of them can have a node on the network, participate in the decision-making, and own shares in the company that oversees its operations.
The stakeholders in consortium blockchain architectures often must identify themselves. Also, those who want to join the network and the consortium must meet established requirements, and that could include paying a fee.
Hyperledger, R3, and B3i are examples of consortium blockchains.
This is a blockchain architecture that has two levels. The foundational level is a public P2P network. The second layer on top of it is a private blockchain that an entity builds.
The private blockchain benefits from the security that the public blockchain architecture gets from high decentralization. Meanwhile, an entity like a business can easily build and customize a blockchain for its unique needs.
Examples of platforms with hybrid blockchain architectures include Polkadot and Kusama.
Consider the following factors before deciding what type of architecture you need:
Actual needs — If your needs are not extensive, all you probably need is a smart contract application on a public blockchain. If it is extensive, then you might need a customized private blockchain.
Level of customization — A smart contract on an existing blockchain can take care of some use cases. Other types might require a different way of working, which might mean designing your own blockchain.
Your budget — It costs a lot more to start from scratch and hire a blockchain developer to build your own blockchain platform than it is to utilize an existing one.
Privacy — A public blockchain is transparent for anyone to see what is recorded on it . However, that also depends on its cryptography. Some public blockchains can offer a high level of privacy if they have great cryptography.
Security — The security of a blockchain architecture is mostly based on its decentralization. That means the more the hash or computational power is distributed amongst different nodes on its P2P network, the more secure it is likely to be. Indeed, public blockchains tend to be more secure than private blockchains. They can withstand external attacks more successfully.
Blockchain architecture is some sort of technological orchestra. It has several components that have to work together in harmony. The following are the most basic components:
This is a computer on the peer-to-peer network. It is connected to the internet and installed with the core software, enabling it to collaborate with others on the network.
The functions of nodes include updating the shared ledger, storing the ledger, and relaying data to other nodes on the network.
This is an entry on the shared ledger of the blockchain. It could be a transfer of digital value like coins from one address to another or a change of state in a smart contract.
This is a cluster or batch of transactions that the peer-to-peer network processes and approves simultaneously on the shared ledger. For example, on the Bitcoin blockchain, all transactions initiated within about ten minutes are approved and recorded as a new block.
This is a chain of blocks linked from the first-ever (the genesis block) to the current one. Each block is linked to the previous one through unique metadata, creating a secure chain. The linking of blocks to create a chain is where the name blockchain comes from.
The word ‘miners’ has two close meanings. First, it refers to a node (the machine) that performs functions for the network, such as relaying data, approving transactions, and storing the shared ledger. It also refers to the person who acquires, sets up, and runs a node to earn the reward that the protocol issues.
This is a set of rules that guide the computers on the peer-to-peer network to interact and, more importantly, form a consensus on how transactions are processed and stored on a shared ledger or how smart contracts are executed.
The protocol is carried out and implemented in the core software that each computer on the network has to install and run.
Blockchains use cryptography for two functions. The first is to secure data on the shared ledger. The second use is to create an addressing system.
The type of cryptography used on blockchain architectures is public-private key cryptography. It creates separate keys for encryption and decryption. The encrypting key is public, while the decrypting key is private.
The hashed version of the public key serves as the wallet address that someone shares to receive payment. Meanwhile, the private key becomes the password they use to access and spend the funds or authorize action in a smart contract.
A solid blockchain has to have the following characteristics:
The cryptography encrypts the data that is recorded in the shared ledger. It also enables special access or ownership to digital assets or the ability to perform certain functions in the smart contract using a private key.
Once data is recorded on a blockchain, it cannot be arbitrarily changed. Any change to the data has to be approved by the entire peer-to-peer network following established protocol. This can be different, though, for private blockchains.
Immutability, in particular, makes smart contracts on the blockchain very powerful applications.
A Blockchain must run on top of a peer-to-peer network of independent computers collaborating through consensus. The more distributed the hash or computer power is amongst nodes on the network, the more decentralized it is. This characteristic enables the immutability of distributed ledgers and smart contract states.
Blockchain is pseudonymous, meaning users don't need to share personal identifying data such as name and address. Instead, they anonymously pick addresses with corresponding private keys. They share the public key and use the private key to act on the blockchain.
Even though blockchain users are pseudo-anonymous, their actions are recorded on a shared public ledger. Users can share with others their activities, and it is easy to audit and verify accuracy.
The world is embracing blockchain alongside other technologies. With all the options coming into the market, it can be confusing, especially if you have not built the necessary internal capacity.
Integrate your business with blockchain technology today.
If you are a developer or business considering blockchain adoption to improve your processes and systems, contact Casper Labs today to get the help you need to get started. You can also apply for a grant to help you build your dApp at Devxdao.
Join the Casper community on Twitter, Telegram and Discord.
Images courtesy of Pixabay
