Blockchain Concepts
The architecture of Blockchain systems, the design of Blockchain solutions, the technology that powers Blockchains, and the business processes when using a Blockchain solution are all very different from traditional systems and applications.
To understand how these systems work and to be able to design and build solutions that will work for a business application, it is necessary to understand some of the underlying concepts.
The first thing to understand about a Blockchain solution is that it is never a standalone solution used by any single entity. It necessarily involves at least two entities who will transact with each other, but in reality, the value of the solution is higher as the number of entities transacting increases.
Blockchains can be used as open transaction systems, such as the cryptocurrency networks that allow anyone to transact and may have millions of users, or closed transaction systems, such as those used by private enterprises to manage transactions with a small group of their business partners. While the underlying architecture, design, and technology may be the same for both types of solutions, the processes can be very different. For example, private Blockchains work differently from the decentralized model since there is a governing entity, or group of entities, that decides who can access the system and control every aspect of the transaction process. They still retain the other benefits of transparency, immutability, traceability, and security.
The second important aspect of a Blockchain solution is the existence and the need to manage multiple copies of the application and its data, which are synchronized in real-time. Traditional systems are designed with a "single source of truth" approach to data, where there is only one master copy that needs to be kept updated.
The third important concept is the need for consensus. In traditional applications, there is a single primary owner of the application that decides how transactions and data should be processed without necessarily taking any inputs from other participants. In a Blockchain solution, collaboration and consensus are key as the system will not work without them.
The key concepts that should be understood when thinking of a Blockchain solution are:
- Networks
- Transactions
- Blocks
- Mining
- Consensus Algorithms
- Encryption Techniques
How it works
