Block chain Architecture

Design
UNIT-1
 Types of Blockchain
 1. Public (Permission less) Block chain:-Public Block chains are
Permission less block chains where anyone can join the network and
read and write to the ledger. Block chain allow to users from anywhere
in the world to interact with the blockchain.
 Anyone having internet and a computer with good hardware can
participate in this public blockchain.
 All the computer in the network hold the copy of other nodes or block
present in the network
 In this public block chain, we can also perform verification of
transactions or records.
 For example- Crypto currency, Documents Verification.

Advantages:-
 Trustable: There are algorithms to detect fraud.
 Secure: This block chain is large in size as it is open to the public. In a
large size, there is greater distribution of records
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Disadvantages:-
 Processing: The rate of the transaction process is very slow, due to
its large size. Verification of each node is a very time-consuming
process.
 Energy Consumption: Proof of work is high energy-consuming. It
requires good computer hardware to participate in the network.

 2. Private(Permissioned) Block chain:-Permissioned block

chain do not allow any users to freely join the network and read or
write to the ledger. It maintains an access control mechanism
between the list of users connected to network.
 Private block chain open to some authorized users only.
 These block chain are operated in a closed network.
 In this few people are allowed to participate in a network within a
company/organization.
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 For example-Supply chain, Assets Owenership.

Advantages:-
 Speed: The rate of the transaction is high, due to its small size.
Verification of each node is less time-consuming.
 Scalability: We can modify the scalability. The size of the
network can be decided manually.
 Privacy: It has increased the level of privacy for confidentiality
reasons.

Disadvantages:-
 Anytime owner and operator can change the rules as per their
need.
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 3. Consortium Block chain:-It is a creative approach that
solves the needs of the organization. This block chain validates the
transaction and also initiates or receives transactions.
 Also known as Federated Block chain.
 This is an innovative method to solve the organization’s needs.
 Some part is public and some part is private.
 In this type, more than one organization manages the block chain.
 For example-Banking.

Advantages:-
 Speed: A limited number of users make verification fast. The high
speed makes this more usable for organizations.
 Authority: Multiple organizations can take part and make it
decentralized at every level. Decentralized authority, makes it more
secure.
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 Consortiums Block chain are more scalable.
 Privacy: The information of the checked blocks is unknown to
the public view. but any member belonging to the block chain can
access it.

Disadvantages:-
 Less transparency.
 If few nodes are getting compromised there is a greater chance of
vulnerability in this block chain.

 4. Hybrid Block chain:- It is the mixed content of the private

and public blockchain, where some part is controlled by some
organization and other makes are made visible as a public block
chain.
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 It is a combination of both public and private block chain.
 Permission-based and permission less systems are used.
 For example-Medical records.

Advantages:-
 Transactions are cheap and fast, and it offers better scalability
than a public block chain network.
 It can choose the participants in the block chain and decide
which transaction can be made public.

Disadvantages:-
 Efficiency: Not everyone is in the position to implement a
hybrid Block chain. The organization also faces some difficulty
in terms of efficiency in maintenance.
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 Transparency: There is a possibility that someone can hide
information from the user. If someone wants to get access through
a hybrid block chain it depends on the organization whether they
will give or not.

 Difference between Hybrid and Consortium Block chain.

Consortium network is a type of hybrid block chain, but with
multiple organizations in charge of its semi-closed ecosystem
instead of just one.
Difference between Permissionless
and Permissioned blockchain
Permissionless Block chain
Open Network allowing anyone to
interaction consensus validation
Also Known As Public block chain
Full transparency
Development in Open Source
Highly transparent
Slower
No cost effective
Partially Decentralized
Permissioned Block chain
Closed Network with limited
Decentralization and designated parties
for participation in Consensus
Validation.
Also Known As Private block chain.
Controlled Transparency
Development by Private entities
Limited transparent.
Faster
Cost effective
Truly Decentralized
 Consensus Mechanism
 Consensus:-
 Consensus simply means an agreement between a group of people.
 Consensus for block chain is a procedure in which the peers of a
block chain network reach agreement about the present state of the
data in the network.

 Consensus Mechanism:-
 Consensus is the process by which a group of peers known as
‘nodes’ on a network determine which block chain transactions are
valid and which are not. Consensus mechanisms are the
methodologies used to achieve this agreement. It’s these sets of
rules that help to protect networks from malicious behavior and
hacking attacks.
 Consensus mechanisms prevent double spending, when a digital
token is spent more than once either intentionally, such as in fraud,
or unintentionally, perhaps due to a glitch in the system.
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 Without consensus, I could spend money in one place and then
spend that same money again before the first transaction settles.

 Types of Consensus protocol:-

Proof of work
 Proof-of-Work (PoW) is a consensus mechanism in the block
chain that enables miners to add a new block to the network
based on calculations performed to discover the perfect hash.
 Proof of work is the original crypto consensus mechanism.
Participants in the network validate the transactions added by the
new block.
 The purpose of a consensus mechanism is to bring all the
nodes in agreement, that is, trust one another.
 Miners(special computers on the network) perform computation
work in solving a complex mathematical problem to add the
block to the network, hence named, Proof-of-Work.
 Target Hash: A target hash is a number that must be greater
than or equal to a hashed block header for a new block to be
awarded.
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 How Does PoW Work?
 The Proof of Work consensus algorithm involves solving a
computationally challenging puzzle in order to create new
blocks. The process is known as ‘mining’, and the nodes in
the network that engages in mining are known as ‘miners’.

 The process of verifying the transactions in the block to be

added, organizing these transactions in chronological order in the
block, and announcing the newly mined block to the entire
network .

 Miners work to solve hard mathematical problems to earn a

reward. As a reward for their efforts, the successful miner
receives a predetermined amount of crypto currency tokens.
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 Challenges with PoW
 The Proof-of-Work consensus mechanism has some issues which
are as follows:
 51% risk: If a controlling entity owns 51% or more than 51% of
nodes in the network, the entity can corrupt the block chain by
gaining the majority of the network.
 Time-consuming: Miners have to check over many nonce values
to find the right solution to the puzzle that must be solved to mine
the block, which is a time-consuming process.
 Resource consumption: Miners consume high amounts of
computing power in order to find the solution to the hard
mathematical puzzle. It leads to a waste of precious
resources(money, energy, space, hardware).
Proof of Stake
 Proof-of-stake is a consensus mechanism processing transactions
and creating new blocks in a block chain
 Under proof-of-stake (POS), validaters are chosen based on the
number of staked coins they have.
 A stake is value/money we bet on a certain outcome. The process
is called staking.
 Under PoS, block creators are called validators. A validator
checks transactions, verifies activity, votes on outcomes, and
maintains records.
 Once the winner has validated the latest block of transactions,
other validators can attest that the block is accurate. When a
threshold number of attestations have been made, the network
updates the blockchain.
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 Advantage of PoS
 Energy efficiency: There’s no need to buy expensive computing
systems and consume massive amounts of electricity to stake
crypto.

 Decentralization: The hardware requirements are lower and more

people can participate in the consensus process.

 Security: The cost for an attacker can, in some circumstances, be

higher. It is argued that gaining 51 % of the available coins is
harder than gaining 51 % of the hashing power.

 Scalability: PoS network achieves scalability by establishing a

consensus before blocks are constructed, which allows for the
processing of thousands of requests per second with less than a
millisecond latency spike.
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 Disadvantage of PoS:
 Large stake validators:
If a group of validator candidates combine and own a significant
share of total crypto currency, they will have more chances of
becoming validators. Increased chances lead to increased
selections, which lead to more and more forging reward earning,
which lead to owning a huge currency share. This can cause the
network to become centralized over time.
Difference between PoW and PoS:
Proof of Work Proof of Stake
The probability of mining a block is The probability of validating a new
determined by how much computational block is determined by how large of a
work is done by miner. stake a person holds (how many coins
they possess).

A reward is given to first miner to solve The validator do not receive a block
cryptographic puzzle of each block. reward instead they collect network fee
as their reward.
To add each block to chain, miners must There is no competition as block creator
compete to solve difficult puzzles using is .chosen by an algorithm based on user
their computer process power stake.
Proof of work systems are less energy Proof of Stake systems are much more
efficient. energy efficient than POW
Initial investment to buy stake and build
Initial investment to buy hardware.
reputation.