BLOCK CHAIN

Definition
A blockchain is “a distributed database that maintains a continuously growing
list of ordered records, called blocks.” These blocks “are linked using
cryptography. Each block contains a cryptographic hash of the previous block,
a timestamp, and transaction data. A blockchain is a decentralized, distributed
and public digital ledger that is used to record transactions across many
computers so that the record cannot be altered retroactively without the
alteration of all subsequent blocks and the consensus of the network.

“Blockchain was invented by Satoshi Nakamoto”—the pseudonym of an

unknown person or persons—“in 2008 to serve as the public transaction
ledger of the cryptocurrency bitcoin… [which] made it the first digital currency
to solve the double-spending problem without the need of a trusted authority
or central server.”
While blockchain is still largely confined to use in recording and storing
transactions for cryptocurrencies such as Bitcoin, proponents of blockchain
technology are developing and testing other uses for blockchain, including
these:

 Blockchain for payment processing and money

transfers. Transactions processed over a blockchain could be settled
within a matter of seconds and reduce (or eliminate) banking transfer
fees.
 Blockchain for monitoring of supply chains. Using blockchain,
businesses could pinpoint inefficiencies within their supply chains
quickly, as well as locate items in real time and see how products
perform from a quality-control perspective as they travel from
manufacturers to retailers.
 Blockchain for digital IDs. Microsoft is experimenting with blockchain
technology to help people control their digital identities, while also giving
users control over who accesses that data.
 Blockchain for data sharing. Blockchain could act as an intermediary
to securely store and move enterprise data among industries.
 Blockchain for copyright and royalties protection. Blockchain could
be used to create a decentralized database that ensures artists maintain
 their music rights and provides transparent and real-time royalty
distributions to musicians. Blockchain could also do the same for open
source developers.
 Blockchain for Internet of Things network management. Blockchain
could become a regulator of IoT networks to “identify devices connected
to a wireless network, monitor the activity of those devices, and
determine how trustworthy those devices are” and to “automatically
assess the trustworthiness of new devices being added to the network,
such as cars and smartphones.”
 Blockchain for healthcare. Blockchain could also play an important
role in healthcare: “Healthcare payers and providers are using
blockchain to manage clinical trials data and electronic medical records
while maintaining regulatory compliance.”

What are the business benefits of

blockchain?
The primary benefit of blockchain is as a database for recording transactions,
but its benefits extend far beyond those of a traditional database. Most
notably, it removes the possibility of tampering by a malicious actor, as well as
providing these business benefits:

 Time savings. Blockchain slashes transaction times from days to

minutes. Transaction settlement is faster because it doesn’t require
verification by a central authority.
 Cost savings. Transactions need less oversight. Participants can
exchange items of value directly. Blockchain eliminates duplication of
effort because participants have access to a shared ledger.
 Tighter security. Blockchain’s security features protect against
tampering, fraud, and cybercrime.

Blockchain explained
As described in Blockchain for Dummies, “Blockchain owes its name to the
way it stores transaction data—in blocks linked together to form a chain. As
the number of transactions grows, so does the blockchain. Blocks record and
confirm the time and sequence of transactions, which are then logged into the
blockchain, within a discrete network governed by rules agreed to by the
network participants.
“Each block contains a hash (a digital fingerprint or unique identifier),
timestamped batches of recent valid transactions, and the hash of the
previous block. The previous block hash links the blocks together and
prevents any block from being altered or a block being inserted between two
existing blocks.” In theory, the method renders the blockchain tamperproof.
The four key concepts behind blockchain are:

 Shared ledger. A shared ledger is an “append-only” distributed system

of record shared across a business network. “With a shared ledger,
transactions are recorded only once, eliminating the duplication of effort
that’s typical of traditional business networks.”
 Permissions. Permissions ensure that transactions are secure,
authenticated, and verifiable. “With the ability to constrain network
participation, organizations can more easily comply with data protection
regulations, such as those stipulated in the Health Insurance Portability
and Accountability Act (HIPAA)” and the EU General Data Protection
Regulation (GDPR).
 Smart contracts. A smart contract is “an agreement or set of rules that
govern a business transaction; it’s stored on the blockchain and is
executed automatically as part of a transaction.”
 Consensus. Through consensus, all parties agree to the network-
verified transaction. Blockchains have various consensus mechanisms,
including proof of stake, multisignature, and PBFT (practical Byzantine
fault tolerance).

Each blockchain network has various participants who play these roles,
among others:

 Blockchain users. Participants (typically business users) with

permissions to join the blockchain network and conduct transactions
with other network participants.
 Regulators. Blockchain users with special permissions to oversee the
transactions happening within the network.
 Blockchain network operators. Individuals who have special
permissions and authority to define, create, manage, and monitor the
blockchain network.
 Certificate authorities. Individuals who issue and manage the different
types of certificates required to run a permissioned blockchain.
Blockchain and Hyperledger
Hyperledger is “an umbrella project of open source blockchains and related
tools, started in December 2015 by the Linux Foundation and supported by
industry players like IBM, Intel and SAP to support the collaborative
development of blockchain-based distributed ledgers.”
Hyperledger participants believe that “only an Open Source, collaborative
software development approach can ensure the transparency, longevity,
interoperability and support required to bring blockchain technologies forward
to mainstream commercial adoption.”
The objective of the Hyperledger project “is to advance cross-industry
collaboration by developing blockchains and distributed ledgers, with a
particular focus on improving the performance and reliability of these systems
(as compared to comparable cryptocurrency designs) so that they are capable
of supporting global business transactions by major technological, financial
and supply chain companies.”

Blockchain security
Blockchain is frequently claimed to be an “unhackable” technology. But 51%
attacks allow threat actors to “gain control over more than half of a
blockchain’s compute power and corrupt the integrity of the shared ledger. …
While this particular attack is expensive and difficult, the fact that it was
effective means that security professionals should treat blockchain as a useful
technology—not a magical answer to all problems.”
The 51% attack takes advantage of what is known as the 51% problem: “If a
single party possesses 51% of a mining pool, it is possible to falsify an entry
into the blockchain, allowing for double spending, and even to fork a new
chain to the advantage of the mining pool.”
The two main types of blockchain, public and private, offer different levels of
security. Public blockchains “use computers connected to the public internet
to validate transactions and bundle them into blocks to add to the ledger. …
Private blockchains, on the other hand, typically only permit known
organizations to join.” Because any organization can join public blockchains,
they might not be right for enterprises concerned about the confidentiality of
the information moving through the network.
Another difference between public and private blockchains regards participant
identity. Public blockchains “are typically designed around the principle of
anonymity. … A private blockchain consists of a permissioned network in
which consensus can be achieved through a process called ‘selective
endorsement,’ where known users verify the transactions. The advantage of
this for businesses is that only participants with the appropriate access and
permissions can maintain the transaction ledger. There are still a few issues
with this method, including threats from insiders, but many of them can be
solved with a highly secure infrastructure.”
Blockchain technologies are growing at an unprecedented rate and powering
new concepts for everything from shared storage to social networks. From a
security perspective, we are breaking new ground. As developers create
blockchain applications, they should give precedent to securing their
blockchain applications and services. Activities such as performing risk
assessments, creating threat models, and doing code analysis, such as static
code analysis, interactive application security testing, and software
composition analysis, should all be on a developer’s blockchain application
roadmap. Building security in from the start is critical to ensuring a successful
and secure blockchain application.
How does blockchain work?

Whether you’ve studied cryptocurrencies in

personal and academic settings, or if you’ve
read an article or two that mention them,
chances are you’ve come across references
to blockchain.
While blockchain technologies are customarily discussed in
relation to cryptocurrencies, the exciting applications are
beginning to spill into debates and conversations in
completely separate industries. These discussions range from
data tracking to national currencies to non-fungible tokens
(NFTs), and all raise the question: what is blockchain capable
of?

It turns out, a great deal. Blockchain technologies are already

around us, whether you’re aware of them or not. But what
exactly makes blockchain technologies so noteworthy? As
leading researchers in the field, Stanford faculty offer many
insights on these topics, starting with the
course Cryptocurrencies and Blockchain Technologies.

Interested in learning about the elementals of blockchain

technologies and their functions? Read on for a crash course
in all things blockchain.

Getting into the blockchain

Blockchain, as it’s moniker suggests, is blocks of data linked
into an uneditable, digital chain. This information is stored in
an open-source decentralized environment, in which each
block’s information is confirmable by every participating
computer. It’s designed to have decentralized management
instead of the traditional hierarchical systems we’re familiar
with. A dispersed structure like the blockchain helps to
ensure trust, validity and usability.

Blockchain is a constantly evolving and complicated field that

offers an increasingly popular channel for online transactions
and varied applications. But how does the blockchain work?
Key terms – proof of work versus proof of stake, miners,
distributed ledger technology, and many more – pose barriers
to comprehension. A system that appears vast and complex
can be made more transparent through clear steps with
explicit terminology explanations.

Key terms important to blockchain

technology
As blockchain is a seemingly endless discussion of
complicated terms and phrases, it’s worth breaking down the
steps of a generalized cryptocurrency transaction and taking
a good look at a few of the key terms of the field.

Blocks are the ledgers that are being updated and added to,
filled with permanently recorded data. Transactions are
added to this database and synced with every node of the
blockchain. The block height refers to the amount of
connected blocks at a certain time, growing with every new
block stacked on the previous block.

These blocks operate on a distributed ledger, meaning that

all information and transactions are shared between parties
regardless of geography or status. These ledgers can
be permissioned or unpermissioned depending on who is
allowed to view it and if there is restricted access or not to
the public or private blockchain

The nature of this decentralized block database system keeps

hackers from tampering or changing information on the
blockchain as altering a single piece of code would be
immediately recognizable against anyone else’s copy.
Attempting to double spend, fraudulently duplicating the
digital currency or asset, is difficult to do because of the
distributed ledger transaction system. In this way, the
distributed ledger is an immutable record that is consistent
and chronologically organized.

Another security measure is the cryptographic hash, or hash

function for transactions within a block. This code takes the
input of data of any length and outputs an alphanumeric
string, or hash value, that acts as a digital fingerprint. It is a
one-way system that ensures inputted data is private, secure,
and deterministic – the same input will always produce the
exact same hashed output for every block. Different
blockchains use their own hash algorithms, but the point is
the same: creating a unique function for the digital asset
transaction.

For the transacting parties, an additional security measure

using digital signatures, which involves public keys and
private keys, corresponding to an account or crypto wallet.
Each party has a public and private key, with public keys
being widely accessible and acting like a known email
address for the users, and private keys, or secret keys, acting
like passwords solely for the owner's use and access. The two
keys are dual parts to produce digital signature of a
transaction. Specifically, when a transaction is published on
the blockchain, the transaction is signed with the private key
and can be later verified with the corresponding public key to
make sure that the origin of the transaction is legitimate and
the content is not tampered

When it comes to verifying a blockchain transaction and

creating the block, the two most popular forms are
called proof of work and proof of stake. These are the
consensus processes that are made by nodes in a particular
blockchain network. Remember that cryptocurrencies that
operate on the blockchain use different verification systems
with their own unique structures.

As the first and is the most common mechanism for proving

transactions, proof of work is used by many popular
cryptocurrencies, including Bitcoin and Ethereum. Proof of
work validates transactions when miners complete a
mathematical puzzle, thus adding blocks to the chain and
mining new coins – think Bitcoin miners. For some digital
currencies, miners are responsible for adding more to the
market. The process of mining is essentially guesswork that
requires enormous computational power — and even more
energy consumption. The miner who is the quickest to solve a
complex mathematical problem relating to the hashed data
will be rewarded with a set amount of the cryptocurrency as
the block is added to the blockchain.

Proof of stake, on the other hand, has validators that “stake”

cryptocurrency on a certain transaction for block creation. By
staking their assets they are entered into a lottery-style
selection process, and, if chosen, the validator will receive
payment in the form of the transaction costs. Proof of stake is
generally fairer as it requires less amassed computational
power, meaning those with more resources don’t hold a
monopoly on verification — which often happens with proof of
work systems. It’s a compelling system, so much that
Ethereum is making the shift to a proof of stake in 2022.
Without the mining feature of proof of stake systems, though,
all of the currency has to be pre-mined instead of the steady
mining and production of a coin like Bitcoin.

While the verification process is generally attributed to the

trading of the digital currency themselves, smart
contracts are another example of digital assets stored on the
blockchain. These are programs in code that allow for self-
executing contracts, removing the need for an arbiter or
management, and only completing a block when the terms
have been met. Ethereum’s system, for example, is set up for
this form of digital asset, opening the blockchain to much
more than just trading cryptocurrencies.

Blockchain beginnings
While the idea of solidified blocks of data has been around for
a while, blockchain technology as it is currently known is
attributed to an individual with the pseudonym Satoshi
Nakamoto. In 2008, Satoshi Nakamoto proposed this new
concept in a paper entitled “Bitcoin: A Peer-to-Peer Electronic
Cash System.” A year later the currency was released to the
public on the blockchain system as we know it.

The idea that Nakamoto proposed aimed to create a payment

system based on public ledger and communal verification,
where each computer, or node, in the network would have a
copy of all transactions. The now historic early transaction on
this novel structure took place several days after the first
ever digitally-mined coins. Hal Finney became the earliest
recipient of crypto through the blockchain, proving that the
system worked.
Since this foundation, Bitcoin became very popular and
lucrative for many, spurring the creation of altcoins – all
digital tokens that followed Bitcoin – that now number over
6,000. But it’s not just cryptocurrency transactions that have
been getting people excited about blockchain data storage.

Significance of blockchain technology

Bitcoin’s system allows users to transfer digital assets in the
form of coins without a traditional regulatory or
administrative body. Previous digital currencies were prone
to counterfeit and fraud, as there was no central fixture to
oversee the production of the asset. Thus, blockchain has
enabled the first ever formation of digital money.

The significance of Bitcoin’s transaction, and one of the

reasons the technology is enticing to individuals and private
industry alike, is that blockchain structures allow for secure,
verifiable, and traceable transactions without centralization.
By its very nature, the decentralized blockchain relies on
each node connected to the network, and on verifiers to
ensure each transaction is accurate and trustworthy.
Blockchain protects user information, data transferal, and is
near impossible to hack or manipulate for personal gain. It is
a method that, while by no means perfect, changes the
traditional path of digital transactions.

This is truly just the beginning of what blockchain technology

is capable of, in the market and in direct transfers.

Popular uses for blockchain technology

and handling data
Blockchain use cases are growing as industries recognize the
potential applications of blockchain technologies in different
systems, from tracking data, information and asset
transactions, to privacy. The strides blockchain tech has
made in digital currencies are enormous, enabling the
realization of a previously unimaginable concept.

Cryptocurrency popularity
From Bitcoin to Ethereum (ether) to the thousands of other
digital currencies currently on the market, cryptocurrencies
continue to be the most popular use for blockchain
technology and data management – but there are rapidly
developing industries that may already be impacted by the
trajectory of these technologies.

The growing number and value of these currencies signals

the importance of blockchain technologies, systems that
have allowed digital currencies to become commonplace. The
veritable gold rush towards this futuristic trading technology
continues to ebb and flow with market predictions and
attitudes thanks to the blockchain system.

It’s not just individual investors who are excited about crypto.
From smart contract functions to the adoption of crypto
currencies as legal tender – Sri Lanka adopting Bitcoin as
discussed in free Stanford Online webinar, "The Future of
Blockchain and Cryptocurrencies,” for example – signals the
long term effects of blockchain technology.

Extended popularity of blockchain technology

A decentralized ledger that everyone can check to ensure
trustworthiness and protects user data goes far beyond
financial transactions. The potential for blockchain
applications are endless, from supply chain tracking to
workflow automation.

Regardless of the future of each individual cryptocurrency,

many companies are already implementing blockchain
technology for their own purposes. For some, blockchain
solutions look like supply-chain tracking that gives all
customers insight into the reliable sources of their product.
For others, it’s about proof of authenticity, streamlining
documentation, or simply increasing customer transparency
and accessibility.

Anthem, for example, is an Indianapolis health insurance

company currently using a blockchain data tracking system
that gives customers access to their own data which
promotes oversight and greater clarity for customers. Or
consider Dole Foods that is attempting to streamline the
supply-chain process and transaction data to increase
transparency about food quality, enabling the company
leaders to track their produce from the farm to the dinner
table.

From home equity loans in California, oil production in the

Netherlands, or the UN’s iris scanning ID process, blockchain
technology implementation is expanding globally.
What is Blockchain Mining?
Mining is the process that Bitcoin and several other cryptocurrencies
use to generate new coins and verify new transactions. It involves
vast, decentralized networks of computers around the world that verify
and secure blockchains – the virtual ledgers that document
cryptocurrency transactions.

What exactly is Blockchain mining?

A peer-to-peer computer process, Blockchain mining is used to secure and verify bitcoin
transactions. Mining involves Blockchain miners who add bitcoin transaction data to
Bitcoin’s global public ledger of past transactions. In the ledgers, blocks are secured by
Blockchain miners and are connected to each other forming a chain.

When we talk in-depth, as opposed to traditional financial services

systems, Bitcoins have no central clearinghouse. Bitcoin transactions are generally
verified in decentralized clearing systems wherein people contribute computing
resources to verify the same.

This process of verifying transactions is called mining. It is probably referred to as

mining as it is analogous to mining of commodities like gold—mining gold requires a lot
of effort and resources, but then there is a limited supply of gold; hence, the amount of
gold that is mined every year remains roughly the same.

In the same manner, a lot of computing power is consumed in the process of mining
bitcoins. The number of bitcoins that are generated from mining dwindles over time. In
the words of Satoshi Nakamoto, there is only a limited supply of bitcoins. Only 21 million
bitcoins will ever be created.

At its core, the term ‘Blockchain mining’ is used to describe the process of adding
transaction records to the bitcoin blockchain. This process of adding blocks to
the Blockchain is how transactions are processed and how money moves around
securely on Bitcoins.

This process of Blockchain mining is performed by a community of people around the

world called ‘Blockchain miners.’

Anyone can apply to become a Blockchain miner. These Blockchain miners install and
run a special Blockchain mining software that enables their computers to communicate
securely with one another.

Once a computer installs the software, joins the network, and begins mining bitcoins, it
becomes what is called a ‘node.’ Together, all these nodes communicate with one
another and process transactions to add new blocks to the blockchain which is
commonly known as the bitcoin network.

This bitcoin network runs throughout the day. It processes equivalent to millions of
dollars in bitcoin transactions and has never been hacked or experienced downtime
since its launch in 2009.

Types of Mining
The process of mining can get really complex and a regular desktop or PC cannot cut it.
Hence, it requires a unique set of hardware and software that works well for the user. It
helps to have a custom set specific to mining certain blocks.

The mining process undertaking can be divided into three categories:

1. Individual Mining

When mining is done by an individual, user registration as a miner is necessary. As

soon as a transaction takes place, a mathematical problem is given to all the single
users in the blockchain network to solve. The first one to solve it gets rewarded.

Once the solution is found, all the other miners in the blockchain network will validate
the decrypted value and then add it to the blockchain. Thus, verifying the transaction.

Also, learn about Binance in Blockchain.

2. Pool Mining

In pool mining, a group of users works together to approve the transaction. Sometimes,
the complexity of the data encrypted in the blocks makes it difficult for a user to decrypt
the encoded data alone. So, a group of miners works as a team to solve it. After the
validation of the result, the reward is then split between all users.

3. Cloud Mining

Cloud mining eliminates the need for computer hardware and software. It’s a hassle-
free method to extract blocks. With cloud mining, handling all the machinery, order
timings, or selling profits is no longer a constant worry.

While it is hassle-free, it has its own set of disadvantages. The operational functionality
is limited with the limitations on bitcoin hashing in blockchain. The operational expenses
increase as the reward profits are low. Software upgrades are restricted and so is the
verification process.
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How can you mine bitcoins?

You can buy and trade for bitcoins, or you can mine them. For mining bitcoins, users
are rewarded in bitcoins. This mechanism forms the pivot around which the bitcoin
economy revolves.

While the cost and difficulty of mining bitcoins individually continue to increase, several
cloud-based mining services have gradually emerged. These services allow individual
users to lease the processing power of mining equipment and mine bitcoins remotely.
However, you can mine bitcoins in person too.

Mining Bitcoins in Cloud

 Obtain a bitcoin wallet: Bitcoins are stored in digital wallets in an encrypted manner. This
will keep your bitcoins safe.
 Secure the wallet: Since there is no ownership of bitcoins, anyone who gains access to
your blockchain wallet can use it without any restriction. So, enable two-factor
authentication and store the wallet on a computer that does not have access to the Internet
or store it on an external device.
 Choose a cloud mining service provider: Cloud mining service providers allow users to
rent processing or hashing power to mine bitcoins remotely. Popular cloud mining service
providers are Genesis Mining and HashFlare.
 Choose a cloud mining package: To choose a package, you will need to decide on how
much you are willing to pay and keep your eyes open to the hashing power the package
will offer. Cloud mining companies will mostly envisage the Return on Investment (ROI)
based on the current market value of Bitcoins.
 Pick a mining pool: This is the best shot you can get to earn bitcoins easily. There are
many mining pools that charge a mere 2 percent of your total earnings. Over here, you will
have to create workers which are basically subaccounts that can be used to track your
contributions to the pool.
 Put your earnings in your own secure wallet: Whenever you witness an ROI, simply
withdraw your earnings and put them in your own secure wallet.

Mining Bitcoins on your own

 Purchase custom mining hardware: You need to purchase an Application-specific
Integrated Circuit (ASIC) miner to mine bitcoins. While purchasing an ASIC Blockchain
miner, you should consider its efficacy in hashing power and take note of its pricing
policies.
 Purchase a power supply: Blockchain miners consume a lot of power. So, get a
dependable power supply that is compatible with the ASIC miner that you purchase.
 Obtain a bitcoin wallet: Bitcoins are stored in digital wallets in an encrypted manner. This
will keep your bitcoins safe.
 Secure the wallet: Since there is no ownership on bitcoins, anyone who gains access to
your wallet can use it without any restriction. So, enable two-factor authentication and store
the wallet on a computer that does not have access to the Internet or store it in an external
device.
 Pick a mining pool: This is the best shot you can get to earn bitcoins easily. There are
many mining pools that charge a mere 2 percent of your total earnings. Over here, you will
have to create workers which are basically subaccounts that can be used to track your
contributions to the pool.
 Connect the power supply to the ASIC Blockchain miner.
 Connect the ASIC Blockchain miner to your router.
 Boot up your ASIC miner.
 Enter your router’s IP address in a web browser.
 Find ‘connected devices in the router miner page.
 Find your ASIC miner and click on it to display the device information.
 Copy and paste the IP address of your ASIC miner into your web browser.
 Log in to the ASIC miner with the default username and password that are ‘Root’ and
‘Root.’
 Select ‘Miner Configuration’ to set up the miner according to your preferences.
 Enter the URL, username, and password for your mining pool on the Miner Configuration
page of the ASIC Miner.
 Click ‘Save and Apply’ to save your credentials for future use.
 Start mining and in periodic intervals check your profitability.
 Put your earnings in your own secure wallet: Whenever you witness an ROI, simply
withdraw your earnings and put them in your own secure wallet.

Uses of Blockchain Mining

1. Validating Transactions

Bitcoin transactions take place in huge figures every day. Cryptocurrencies function
without a central administrator and the insecurity can be substantial with the
transactions that transpire. So, what is the authentication method with such
cryptocurrencies? With each transaction, new blocks are added to the blockchain in the
network and the validation lies in the mining results from the blockchain miners.

2. Confirming Transactions

Miners work the blockchain mining process to confirm whether the transaction is
authentic or not. All confirmed transactions are then included in the blockchain.

3. Securing Network

To secure the transaction network, bitcoin miners work together. With more users
mining the blockchain, blockchain network security increases. Network security ensures
that there are no fraudulent activities happening with cryptocurrencies.
 TYPES OF NODES
Definition: A blockchain is a distributed ledger composed of a network
of multiple nodes. Blockchain nodes are the moderators that build the
infrastructure of a decentralized network. Their primary function is to
maintain the public ledger's consensus, which varies according to the
type of node. The architecture and design requirements of a particular
blockchain protocol determine the types of nodes. Each of the nodes
has a specific role to play in maintaining the operation of the
blockchain ecosystem.

Create, verify, and protect blockchain transactions and assets, read

more about Blockchain Protect
Blockchain nodes communicate with each other to broadcast to the
network and acquire the necessary consensus to map and validate
new blocks in accordance with the consensus algorithm of the
network. In simplified terms, a blockchain node is one of the
computers that collectively run the blockchain’s software. It enables
the blockchain to validate transactions and keep the network secure
ensuring that the network remains decentralized. Every participant in a
decentralized network is a node, and each node is critical to the
network's security and stability.
Explanation

Types of Blockchain Nodes

There are different types of nodes in a Blockchain network that serve
various purposes. Nodes communicate with each other through
a peer-to-peer network, allowing them to exchange information while
maintaining consensus on the state of the Blockchain.

The types of Blockchain Nodes are:

1. Full Nodes

As they maintain a complete copy of the Blockchain ledger, Full

Nodes are the most essential type of node in the Blockchain network.
These nodes are able to independently verify the entire Blockchain
history since they download and store copies of every transaction and
block that occurs on the network. The stability of the Blockchain
network depends on Full Nodes, which constitute the foundation of the
network.

As part of a peer-to-peer network, Full Nodes communicate with other

nodes to maintain the accuracy and current state of the Blockchain.
They validate transactions and blocks by checking for inconsistencies,
such as double-spending or invalid signatures, before adding them to
the Blockchain. Blockchain developers and organizations that require
a high level of security and control over their Blockchain transactions
often run Full Nodes. These nodes are in charge of validating all
blocks and transactions.

2. Light Nodes

Light Nodes are a more lightweight variation of Full Nodes, sometimes

referred to as SPV (Simplified Payment Verification) nodes. They are
designed to operate on mobile devices such as smartphones and
tablets with limited storage and processing power. Light Nodes do not
download the entire Blockchain but rather a small portion of it that
contains information relevant to their transactions.

To obtain the information, Light Nodes are required to verify their

transactions by communicating with a number of Full Nodes in the
network. Light Nodes are faster and more efficient than Full Nodes,
however, because they rely on Full Nodes for validation, they are also
less secure.

This type of blockchain node is designed for fast, straightforward

processing of transactions and daily activities, and is second in usage
popularity only to archival nodes. Light nodes are equipped with only
the essential data and rely on Full Nodes to function, as they do not
download the full blockchain.
3. Miner Nodes

Miner Nodes are responsible for validating transactions and

generating new blocks on the Blockchain. These nodes execute
complex calculations to solve mathematical problems, allowing them
to create new blocks and receive rewards in the form of
cryptocurrency. Miner Nodes require specialized hardware and
software to perform mining calculations. They are often run by major
mining pools or individuals with the financial ability to invest in the
necessary equipment. Miner Nodes are critical components of the
Blockchain network, ensuring that new transactions are processed
and added to the Blockchain in a timely and secure manner.

Node versus Miner

Node

 A computer (or a ‘participant’) connected to the peer-to-peer

network, storing a copy of the blockchain
 Requires only software to connect to the network
 Receives no direct financial incentive for running a node
 Can be a Full Node or Light Node, depending on the amount of
data they store
 Support the ‘consensus’ model process by verifying transactions
and blocks, ensuring that all transactions are legitimate
 Can be run by anyone, leading to a more decentralized network
 Uses much less energy than mining

Miner

 Mines and creates new blocks, adds and validates transactions

 Creates the next block in the chain, using the header data hash
of the previous block and a new hash for the current block. This
then requires acceptance by the network.
 Each time a transaction is announced on the network,
specialized hardware, high computing power and energy
consumption is required to solve complex cryptographic
 mathematical problems for the purpose of providing a stable
settlement mechanism to the network
 Verifies cryptocurrency transactions and creates new units of
cryptocurrency
 Earns rewards in the form of new cryptocurrency units and
transaction fees
 Must be a full node in order to participate in mining
 Mining is often concentrated in the hands of a few large mining
pools, raising concerns about centralized control

4. Pruned Full Nodes

A Pruned Full Node has a limited amount of memory. It downloads the

blockchain and then deletes blocks in chronological order, beginning
with the oldest. This is known as pruning, and blocks are not removed
completely since their metadata and sequence remain. This node will
keep the most recent blockchain transactions up to its limit after
pruning. If the size limit is set to 1 GB, it will store the most recent
gigabyte of transactions.

5. Archival Full Nodes

An Archival Full Node stores the entire blockchain ledger, meaning all
the transactions, back to the beginning of time. Archival Full Nodes
are the only valuable and reliable source for verifying transaction data
from earlier in a blockchain’s history, as they aren’t afflicted by the
time or storage limit of Pruned Full Nodes. This type of blockchain
node needs to have a large amount of memory available.

While Pruned Full Nodes are beneficial in the network since they
improve security and decentralization, Archived Full Nodes are
essential since they are the only method for the blockchain to remain
fully operational.

6. Authority Nodes

An Authority Node is a node that has been approved by the

organization or community managing a blockchain. It's found in
blockchains that have a vetting process required to be a node.
Blockchains that use a proof-of-authority mechanism, for example,
only use approved nodes managed by node operators who have
provided identifying information.

7. Master Nodes

Several blockchains contain Master Nodes, which are distinguished

from normal Full Nodes by specific privileges and responsibilities. A
Master Node is a type of Full Node that validates transactions and
maintains a blockchain record, but it cannot add blocks to the
blockchain, instead, they only verify those submitted by other nodes,
as well as execute other protocol-defined managing, governing, and
regulatory functions.

8. Staking Nodes

These nodes use a method known as “staking” in their authentication

process. Using locked funds as collateral, a proof-of-stake consensus
model randomly designates authentication powers to participants who
have met predetermined metrics, such as contributing a certain
amount of tokens to the protocol or logging in a certain number of
hours on a network. A Staking Node may consist of one user or a
staking pool, which is a group of users who pool their crypto funds to
have a better chance of being selected to confirm blocks.

9. Lightning Nodes

To alleviate network congestion, Lightning Nodes execute

transactions off-chain through separate, out-of-network connections.
The transactions are processed and then submitted to the main
blockchain. Lightning Nodes are useful on congested blockchain
networks with slow processing and high transaction fees. These
nodes allow for low-cost, instantaneous exchanges while reducing
network load.
10. Super Nodes

Rarest of the node variations, Super Nodes are created on demand to

perform specialized tasks, such as implementing protocol changes or
managing protocols.

Blockchain node types function as blockchain storage containers,

allowing users to access and acquire data from the network. They are
entirely transparent and accessible to everybody on the network, and
they serve as a vital point of interaction for users. Overall, the role of
different types of nodes in blockchain networks is essential for the
network's security, stability, and accessibility.

Organizations of all sizes can easily implement powerful, secure, and

resilient blockchain applications, safeguarded by HSMs from Utimaco.