Addresses
Addresses are unique identifiers that are used in a transaction on the blockchain to denote senders and recipients. An address is usually a public key or derived from a public key. While addresses can be reused by the same user, addresses themselves are unique. In practice, however, a single user may not use the same address again and generate a new one for each transaction. This newly generated address will be unique. Bitcoin is in fact a pseudonymous system. End users are usually not directly identifiable but some research in de-anonymizing bitcoin users have shown that users can be identified successfully. As a good practice it is suggested that users generate a new address for each transaction in order to avoid linking transactions to the common owner, thus avoiding identification.
Transaction
A transaction is the fundamental unit of a blockchain. A transaction represents a transfer of value from one address to another.
Block
A block is composed of multiple transactions and some other elements such as the previous block hash (hash pointer), timestamp, and nonce.
Peer-to-peer network
As the name implies, this is a network topology whereby all peers can communicate with each other and send and receive messages.
Scripting or programming language
This element performs various operations on a transaction. Transaction scripts are predefined sets of commands for nodes to transfer tokens from one address to another and perform various other functions. Turing complete programming language is a desirable feature of blockchains; however, the security of such languages is a key question and an area of important and ongoing research.
Virtual machine
This is an extension of a transaction script. A virtual machine allows Turing complete code to be run on a blockchain (as smart contracts) whereas a transaction script can be limited in its operation. Virtual machines are not available on all blockchains; however, various blockchains use virtual machines to run programs, for example Ethereum Virtual Machine (EVM) and Chain Virtual Machine (CVM).
State machine
A blockchain can be viewed as a state transition mechanism whereby a state is modified from its initial form to the next and eventually to a final form as a result of a transaction execution and validation process by nodes.
Nodes
A node in a blockchain network performs various functions depending on the role it takes. A node can propose and validate transactions and perform mining to facilitate consensus and secure the blockchain. This is done by following a consensus protocol. (Most commonly this is PoW.) Nodes can also perform other functions such as simple payment verification (lightweight nodes), validators, and many others functions depending on the type of the blockchain used and the role assigned to the node.
Smart contracts
These programs run on top of the blockchain and encapsulate the business logic to be executed when certain conditions are met. The smart contract feature is not available in all blockchains but is now becoming a very desirable feature due to the flexibility and power it provides to the blockchain applications.
Features of a blockchain
A blockchain performs various functions. These are described below in detail.
Distributed consensus
Distributed consensus is the major underpinning of a blockchain. This enables a blockchain to present a single version of truth that is agreed upon by all parties without the requirement of a central authority.
Transaction verification
Any transactions posted from nodes on the blockchain are verified based on a predetermined set of rules and only valid transactions are selected for inclusion in a block.
Platforms for smart contracts
A blockchain is a platform where programs can run that execute business logic on behalf of the users. As explained earlier, not all blockchains have a mechanism to execute smart contracts; however, this is now a very desirable feature.
Transferring value between peers
Blockchain enables the transfer of value between its users via tokens. Tokens can be thought of as a carrier of value.
Generating cryptocurrency
This is an optional feature depending on the type of blockchain used. A blockchain can generate cryptocurrency as an incentive to its miners who validate the transactions and spend resources in order to secure the blockchain.
Smart property
For the first time it is possible to link a digital or physical asset to the blockchain in an irrevocable manner, such that it cannot be claimed by anyone else; you are in full control of your asset and it cannot be double spent or double owned. Compare it with a digital music file, for example, which can be copied many times without any control; on a blockchain, however, if you own it no one else can claim it unless you decide to transfer it to someone. This feature has far-reaching implications especially in Digital Rights Management (DRM) and electronic cash systems where double spend detection is a key requirement. The double spend problem was first solved in bitcoin.
Provider of security
Blockchain is based on proven cryptographic technology that ensures the integrity and availability of data. Generally, confidentiality is not provided due to the requirements of transparency. This has become a main barrier for its adaptability by financial institutions and other industries that need privacy and confidentiality of transactions. As such it is being researched very actively and there is already some good progress made. It could be argued that in many situations confidentiality is not really needed and transparency is preferred instead. For example, in bitcoin confidentiality is not really required; however, it is desirable in some scenarios. Research in this area is very ripe and already major progress has been made towards providing confidentiality and privacy on blockchain. A more recent example is Zcash, which will be discussed in more detail in later chapters. Other security services such as nonrepudiation and authentication are also provided by blockchain as all actions are secured by using private keys and digital signatures.
Immutability
This is another key feature of blockchain: records once added onto the blockchain are immutable. There is the possibility of rolling back the changes but this is considered almost impossible to do as it will require an unaffordable amount of computing resources. For example, in much desirable case of bitcoin if a malicious user wants to alter the previous blocks then it would require computing the PoW again for all those blocks that have already been added to the blockchain. This difficulty makes the records on a blockchain practically immutable.
Uniqueness
This feature of blockchain ensures that every transaction is unique and has not been spent already. This is especially relevant in cryptocurrencies where much desirable detection and avoidance of double spending are a key requirement.
Smart contracts
Blockchain provides a platform to run smart contracts. These are automated autonomous programs that reside on the blockchain and encapsulate business logic and code in order to execute a required function when certain conditions are met. This is indeed a revolutionary feature of blockchain as it allows flexibility, programmability, and much desirable control of actions that users of blockchain need to perform according to their specific business requirements.
Follow me on :-
Youtube : https://goo.gl/2exULj
Instagram : https://goo.gl/ikLTyb
Quora : https://goo.gl/sEoxY3
Medium : https://goo.gl/M3QvUq
Linekdin : https://goo.gl/LeaGSF
Steemit : https://goo.gl/o7RUj7
GitHub ; https://goo.gl/3R38LK
