1.02 – The Structure of Blockchains
Understanding the Structure of Blockchains
Each blockchain is structured in its unique way, but Bitcoin serves as a foundational model that has influenced many subsequent blockchains. In the Bitcoin network, data is structured so that each full node—essentially the computers running the network—contains a complete copy of the entire blockchain. This approach ensures data persistence, as the data remains intact even if some nodes are compromised. However, since every node maintains a full record of all past and future transactions, the storage requirements necessitate that entries be as compact as possible.
In contrast, other distributed networks, like Napster and Pirate Bay, function as online indexes of data where individual files are shared from specific nodes. While this allows the sharing of large files, it also presents challenges in data retrieval and verification. The desired data might not be available across all network participants, and there is a risk that the data could be corrupted or contain unwanted elements like viruses.
Core Elements of Blockchain Structure
Block
A block is essentially a list of transactions recorded into a ledger over a certain period. The size, period, and triggering event for blocks vary between different blockchains. While not all blockchains prioritize recording the movement of their cryptocurrency, all do maintain records of such transactions. In essence, a transaction in a blockchain is the recording of data, with an assigned value to interpret the data’s significance, as seen in financial transactions.
Chain
A chain is formed by a hash that links one block to the next, creating a mathematical “chain” that connects them. This chaining is crucial for establishing trust within the blockchain. The hash is generated from the data in the previous block, acting as a digital fingerprint that locks blocks in sequence and time.
Though blockchains are relatively new, the concept of hashing is not. Hashing has been around for over 30 years and is employed in blockchains because it produces a one-way function that cannot be decrypted. A hashing function generates a mathematical algorithm that maps data of any size to a fixed-size bit string, typically 32 characters long. This bit string represents the hashed data. The Secure Hash Algorithm (SHA), particularly SHA-256, is a commonly used cryptographic hash function in blockchains, generating a nearly unique 256-bit hash. For practical purposes, think of a hash as a digital fingerprint that locks data within the blockchain.
Network
The network in a blockchain is composed of “full nodes,” which are computers running an algorithm that secures the network. Each node contains a complete record of all transactions ever recorded on the blockchain. These nodes are distributed globally and can be operated by anyone. However, operating a full node is demanding in terms of cost, time, and effort, so operators are incentivized with rewards—usually in the form of tokens or cryptocurrency, such as Bitcoin.
Bitcoin vs. Blockchain
The terms Bitcoin and blockchain are often used interchangeably, but they refer to different things. Bitcoin is a specific cryptocurrency, while blockchain is the underlying protocol that enables the secure transfer of Bitcoin. In simple terms, blockchain is a type of software, and Bitcoin is the cryptocurrency that operates within its network.
