3 Parts of a Blockchain

By Crystal Wiese – Director of Marketing

To understand blockchain, it’s helpful to think of blockchain in three distinct parts: the block, the chain, and the network.These components are what make up decentralized ledgers. We could explain each piece in great detail, but for this introduction, we’ll walk through each of these three pieces briefly and keep it simple.

Block: A block is a time bound collection of data that is published into a ledger entered into the blockchain over a given period. Data is gathered into a block for a set period of time and at the end of the period, the entire block is added to the blockchain. After that a new block is started. The size, period, and triggering event for blocks can vary across blockchains. For example, blocks are entered into the Factom blockchain every 10 minutes, and Ethereum is every 15 seconds.

Each block is made up of entries, the smallest piece of data that is stored in the ledger. An entry can be any piece of information that adheres to a format accepted by its ledger. Most blockchains are strict about how entries are written to their ledger, while others like Factom allow users to write anything in a more flexible format. Strict formats are very useful for recording fungible “things” while flexible formats allow users to store data in a way that is useful for the user for non-fungible “things”. There is typically a limit on the size of data that can be included in an entry. For larger sets of data, a user can opt to break out the data over multiple entries. This is referred to as linked entries, which is a useful concept when you are thinking about securing data on the blockchain. The simplest way to find an entry in a blockchain is by searching for the hash of the entry in the blockchain.

Chain: A chain is a collection of blocks that are linked together referencing hashes from the previous block. (What is a Hash?) The hash is a unique digital signature generated cryptographically, which links the two subsequent blocks together to form a chain. Think of a hash as the mathematical glue that holds the blockchain together and creates trust.

Blockchain is a relatively new innovation that builds on time tested mathematical functions. The concept of hashing was invented over three decades ago by the National Security Agency. Hashes are useful because they are a one-way function that cannot be decrypted. Imagine trying to recreate a human. It’s impossible to recreate the original. Just as with a finger print, data cannot be reconstructed to its original form using just the hash.

Network: The last part of a blockchain is the network. The network consists of computers (or nodes, as they’re commonly referred) that host the information entered into the blockchain via transactions. Before an entry is made permanent in the blockchain, all nodes verify the transaction. Nodes are computers or systems operating on a larger network. Devices such as a personal computer or cell phone can act as nodes. When defining nodes on the internet, a node is anything that has an IP address. The nodes consist of the machines and code used to run the network. Node operators participate in the network by keeping track of the transactions and reaching a consensus about those transactions’ validity and ordering them with other nodes in the network.

Nodes are rewarded for running the protocol with a small amount of the cryptocurrency associated with the protocol.

The bigger and more distributed the network, the more secure the blockchain. The more decentralized the blockchain becomes, the greater the immutability of its records. As the network grows, it becomes increasingly more difficult to overthrow the network. For example, the Bitcoin blockchain has about 5,000 nodes globally distributed, so it's extremely secure.

In short, here is what makes blockchains powerful - blocks of data chained together to create immutable data, and the network provides decentralization.

About Tokens

Not all blockchains record and secure the movement of their cryptocurrency or token as their primary objective. For instance, Factom’s blockchain primarily records cryptographic hashes of data which provides the equivalent of a seal on the data hashed which provides positive proof that the original data has not been tampered with.

However, all blockchains do record movement of their cryptocurrency or token. The transaction is simply a recording of the data, and assigning a value to it (like in a financial transaction) is used to interpret what that data means.