Layman’s Definition:
Blockchain is an ever-growing, secure, shared recordkeeping system in which each user of the data holds a copy of the records, which can only be updated if all parties involved in a transaction agree to update.
Technical Definition:
Blockchain is a peer-to-peer, distributed ledger that is cryptographically secure, append-only, immutable, and updateable only via consensus or agreement among peers.
Characteristics of Blockchain:
- Peer-to-Peer (P2P):
- No central authority.
- Nodes (participants) communicate directly and perform transactions without third parties.
- Distributed Ledger:
- The ledger is shared among all nodes.
- Every participant holds a complete copy of the blockchain.
- Cryptographically Secure:
- Uses cryptography for security (integrity, authentication, and non-repudiation).
- Digital signatures and hash functions are used.
- Append-Only:
- New data is added in time-sequential order.
- Existing data cannot be altered easily, making it immutable.
- Updatable Only via Consensus:
- All participants must agree on any update.
- Uses consensus algorithms (like PoW, PoS, BFT, etc.).
Network View of Blockchain:
Blockchain operates as a layered architecture within a distributed P2P network, as shown below.
Explanation of Layers:
- Internet Layer:
- Provides communication via the internet.
- P2P Network Layer:
- Allows nodes to communicate and propagate information using protocols like gossip.
- Cryptography Layer:
- Ensures secure operations via digital signatures and hash functions.
- Consensus Layer:
- Maintains agreement among all nodes on the blockchain state.
- Execution Layer:
- Executes transactions and smart contracts using virtual machines (like EVM).
- Application Layer:
- Provides user interfaces like decentralized applications (dApps), smart contracts, and DAOs.