UNIT 2: Structure of Blockchain

2.1 Types of Blockchain

There are majorly four types of Blockchain -

1. Public Blockchain

A public blockchain is a non-restrictive, permission-less distributed ledger system. A

node or user which is a part of the public blockchain is authorized to access current and
past records, verify transactions or do proof-of-work for an incoming block and do
mining.

 It is a permissionless distributed ledger on which anybody can join and conduct transactions.
 It is a non-restrictive form of the ledger in which each peer has a copy. This also means that
anyone with an internet connection can access the public Blockchain.
 This user has access to historical and contemporary records and the ability to perform mining
operations.
 These complex computations must be performed to verify transactions and add them to the
ledger.
 On the blockchain network, no valid record or transaction may be altered. Because the source
code is usually open, anybody can check the transactions, uncover problems, and suggest
fixes.
 Advantages of Public Blockchain -
 Trustable: Public Blockchain nodes do not need to know or trust each other because the proof-
of-work procedure ensures no fraudulent transactions.
 Secure: A public network can have as many participants or nodes as it wants, making it a
secure network. The higher the network's size, the more records are distributed, and the more
difficult it is for hackers to hack the entire network.
 Open and Transparent: The data on a public blockchain is transparent to all member nodes.
Every authorized node has a copy of the blockchain records or digital ledger.
Disadvantages of Public Blockchain -
 Lower TPS: The number of transactions per second in a public blockchain is extremely low.
This is because it is a large network with many nodes which take time to verify a transaction
and do proof-of-work.
 Scalability Issues: Its transactions are processed and completed slowly. This harms
scalability. Because the more we try to expand the network's size, the slower it will become.
 High Energy Consumption: The proof-of-work device is expensive and requires lots of
energy. Technology will undoubtedly need to develop energy-efficient consensus methods.
Uses of Public Blockchain -
 Voting: Governments can use a public blockchain to vote, ensuring openness and trust.
 Fundraising: Businesses or initiatives can use the public Blockchain to improve transparency
and trust.

2. Private Blockchain
A private blockchain is a restrictive or permission blockchain operative only in a closed
network. Private blockchains are usually used within an organization or enterprises where
 only selected members are participants of a blockchain network. The level of security,
authorizations, permissions, accessibility is in the hands of the controlling organization.
Thus, private blockchains are similar in use as a public blockchain but have a small and
restrictive network.

 A blockchain network operates in a private context, such as a restricted network, or is

controlled by a single identity.
 While it has a similar peer-to-peer connection and decentralization to a public blockchain
network, this Blockchain is far smaller.
 They are often run on a small network within a firm or organization rather than open to
anybody who wants to contribute processing power.
 Permissioned blockchains and business blockchains are two more terms for them.

Advantages of Private Blockchain -

 Speed: Private Blockchain transactions are faster. This is because a private network has a
smaller number of nodes, which shortens the time it takes to verify a transaction.
 Scalability: You can tailor the size of your private Blockchain to meet your specific
requirements. This makes private blockchains particularly scalable since they allow companies
to easily raise or decrease their network size.
Disadvantages of Private Blockchain -
 Trust Building: In a private network, there are fewer participants than in a private network.
 Lower Security: A private blockchain network has fewer nodes or members, so it is more
vulnerable to a security compromise.
 Centralization: Private blockchains are limited in that they require a central Identity and
Access Management (IAM) system to function. This system provides full administrative and
monitoring capabilities.
Uses of Private Blockchain -
 Supply Chain Management: A private blockchain can be used to manage a company's supply
chain.
 Asset Ownership: A private blockchain can be used to track and verify assets.
 Internal Voting: Internal voting is also possible with a private blockchain.

3. Hybrid Blockchain

A hybrid blockchain is a combination of the private and public blockchain. It uses the
features of both types of blockchains that is one can have a private permission-based
system as well as a public permission-less system. With such a hybrid network, users can
control who gets access to which data stored in the blockchain. Only a selected section
of data or records from the blockchain can be allowed to go public keeping the rest as
confidential in the private network. The hybrid system of blockchain is flexible so that
users can easily join a private blockchain with multiple public blockchains. A transaction
in a private network of a hybrid blockchain is usually verified within that network.
 Organizations who expect the best of both worlds use a hybrid blockchain, which combines
the features of both private and public blockchains.
 It enables enterprises to construct a private, permission-based system alongside a public,
permissionless system, allowing them to choose who has access to certain Blockchain data and
what data is made public.
 In a hybrid blockchain, transactions and records are typically not made public, but they can be
validated if necessary by granting access via a smart contract.
Advantages of Hybrid Blockchain -
 Secure: Hybrid Blockchain operates within a closed environment, preventing outside hackers
from launching a 51 percent attack on the network.
 Cost-Effective: It also safeguards privacy while allowing third-party contact. Transactions are
inexpensive and quick and scale better than a public blockchain network.
Disadvantages of Hybrid Blockchain -
 Lack of Transparency: Because information can be hidden, this type of blockchain isn't
completely transparent.
 Less Incentive: Upgrading can be difficult, and users have no incentive to participate in or
contribute to the network.
Uses of Hybrid Blockchain -
 Real Estate: Real-estate companies can use hybrid networks to run their systems and offer
information to the public.
 Retail: The hybrid network can also help retailers streamline their processes.
 Highly Regulated Markets: Hybrid blockchains are also well-suited to highly regulated areas
like the banking sector.

4. Consortium Blockchain

A consortium blockchain is a semi-decentralized type where more than one organization

manages a blockchain network. More than one organization can act as a node in this type
of blockchain and exchange information or do mining.

 In the same way that a hybrid blockchain has both private and public blockchain features, a
Consortium blockchain, also known as a federated blockchain, does.
 However, it differs because it involves various organizational members working together on a
decentralized network.
 Predetermined nodes control the consensus methods in a consortium blockchain.
 It has a validator node responsible for initiating, receiving, and validating transactions.
Transactions can be initiated or received by member nodes.
Advantages of Consortium Blockchain -
 Secure: A consortium blockchain is more secure, scalable, and efficient than a public
blockchain network. It, like private and mixed blockchains, has access controls.
Disadvantages of Consortium Blockchain -
 Lack of Transparency: The consortium blockchain has a lower degree of transparency. If a
member node is infiltrated, it can still be hacked, and the Blockchain's rules can render the
network inoperable.
Uses of Consortium Blockchain -
 Banking and Payments: A consortium can be formed by a group of banks working together.
They have control over which nodes will validate transactions.
 Research: A consortium blockchain can be employed to share research data and outcomes.
 Food Tracking: It is also apt for food tracking.

Comparative Analysis of Blockchain Types

Private Hybrid Consortium

Feature Public Blockchain Blockchain Blockchain Blockchain

Restricted to Limited to a Combination of

Access Open to everyone specific group of public and
Control participants organizations private

Mixed
Semi-
Decentralized Centralized governance
decentralized
Governance structure

Low Moderate Variable

High transparency
Transparency transparency transparency transparency

Moderate High scalability

Limited scalability High scalability
Scalability scalability potential

High due to Lower due to Variable

Moderate security
Security decentralization centralization security
 Private Hybrid Consortium
Feature Public Blockchain Blockchain Blockchain Blockchain

Slower due to Faster than

Faster
Transaction consensus public, slower Variable speed
transactions
Speed mechanisms than private

Enterprise Supply chain, Various

Cryptocurrencies,
solutions, data banking, applications
decentralized apps
Use Cases privacy collaborations need flexibility

Permissionless Blockchain

A permissionless blockchain is a type of blockchain network that allows anyone to participate

in the network without requiring special permissions or approvals.
1. Open Access: Anyone can join the network, validate transactions, and contribute to the
blockchain. This openness fosters a decentralized environment where no single entity
controls the network.
2. Decentralization: Permissionless blockchains operate on a decentralized network of nodes,
which helps to distribute power and reduce the risk of censorship or manipulation by any
single party.
3. Consensus Mechanisms: These blockchains typically use consensus algorithms such as
network participants’ Proof of Stake (PoS) to validate transactions and secure the network.
Participants compete to solve complex mathematical problems (in the case of PoW) or stake
their own tokens (in PoS) to earn the right to validate new blocks.
4. Transparency: All transactions on a permissionless blockchain are recorded on a public
ledger, allowing anyone to view transaction history and verify data integrity.
5. Anonymity: While transactions are transparent, participants often remain pseudonymous.
Users are identified by their public keys rather than personal information, providing a layer
of privacy.
Permissioned Blockchain
A permissioned blockchain is a type of blockchain network that restricts access and
participation to a select group of authorized users. Unlike permissionless blockchains, where
 anyone can join and validate transactions, permissioned blockchains require participants to
obtain permission before they can access the network or perform certain actions.
1. Access Control: Only authorized participants can join the network, ensuring that all nodes
are known and vetted. This allows for greater control over who can validate transactions and
access data.
2. Centralized Governance: Typically governed by a consortium of organizations or a central
authority, which makes decisions about network rules and policies.
3. Enhanced Privacy: Transactions and data are often more private, as sensitive information
can be kept off-chain or shared only among authorized parties.
4. Customizable Protocols: Organizations can customize consensus mechanisms and other
protocols to meet their specific needs and requirements.

2.2 Sidechain
To solve the problem of scalability, a technological solution called sidechain was born. What is a
sidechain and how do they solve blockchain scalability problems?
What is a sidechain?
A sidechain is a separate blockchain that runs in parallel and operates independently of the main
blockchain. The main job of the sidechain is to process and validate data for the main chain and
add many other functions such as running smart contract for blockchains.
Why was the sidechain born?
Sidechains are an idea proposed by Dr. Adam Back in the paper titled “Enabling Blockchain
Innovations with Pegged Sidechains,” which allows for the creation of separate blockchain
networks that can connect to the main blockchain.
Sidechains operate independently and can transfer assets between themselves and the main
blockchain via a “two-way peg”. Also because sidechains operate as independent blockchains,
they have their own tokens, consensus and security mechanisms. However, sidechains are
capable of communicating with each other and with the main blockchain at the same time
without the main blockchain, the sidechain cannot function either.
Sidechain helps run dApps (decentralized applications) on the blockchain and reduces the load
on the main blockchain. Sidechain implementations usually begin with locking assets on the
main blockchain and creating transactions on the sidechain with cryptographic proofs. This
enhances the flexibility and scalability of blockchain systems.
How does the sidechain work?
The mechanism of operation of the sidechain is a way to connect and interact between the
secondary blockchain (sidechain) and the main blockchain (mainchain) in a two-way peg model.

The process goes like this:

Locking up: If you want to transfer assets from the mainchain to the sidechain, you need to
perform an action called “locking assets.” This means that the assets will freeze on the mainchain
and cannot be moved or used on the mainchain until the security process is complete.
Create transactions on the sidechain: After the assets have been locked on the mainchain, users
can create transactions on the sidechain. For example, they can transfer these assets to others on
the sidechain or use them to perform other operations.
Security mechanism: To ensure the integrity and reliability of transactions on the sidechain, the
two-way peg mechanism uses cryptographic proofs and data structures such as Merkle Trees.
Transactions on the sidechain are recorded and include cryptographic proof, indicating that the
asset has been correctly locked on the mainchain.
Asset Release: This process is for transferring assets back from the Sidechain to the main chain.
When users want to transfer assets from the sidechain back to the mainchain or to another
sidechain, they need to provide cryptographic proof and request the release of assets on the
mainchain. This cryptographic proof provides proof that the asset has been duly used on the
sidechain and can be returned.
Unlock assets on the mainchain: Once cryptographic proofs are verified and accepted, the assets
are released on the mainchain and returned to a free state. Users can use this asset on the
mainchain or switch to another sidechain if needed.

Advantages
Scaling: Sidechains allow the scaling of the blockchain by reducing the computational load off
the mainchain. This improves the speed and processing capabilities of the system.
Flexibility: Sidechains facilitate flexibility by allowing separate rules and applications to be
implemented on each sidechain. This is suitable for diverse use cases.
Segregated security: Each sidechain has its own security and consensus mechanism, ensuring
that if one sidechain is hacked or compromised, then the other sidechains remain safe.
Communication between blockchains: Sidechains allow blockchains to interact with each other
through two-way bridges. This opens up many opportunities for the exchange of data and assets
between different blockchains.
Disadvantages
Poor security issues: Security issues often occur on sidechains because they are small
blockchains that are easily exposed to 51% attacks (PoW mechanisms) or untrusted nodes (PoS
mechanisms).
Technical limitations: Sidechain implementations often face many technical difficulties and
require a high level of complexity in planning and implementation.
Transaction separation problem: The separation of transactions between the mainchain and the
sidechain can cause problems related to the integrity of the blockchain system.
Depends on the mainchain: The sidechain depends on the mainchain to ensure the safety and
transparency of transactions, so if the mainchain goes down, the sidechain can be affected.
USE CASES:

Polygon (formerly Matic Network)

Integration with Ethereum: Polygon was built to solve the problem of transaction fees and
scalability of Ethereum. Polygon is a sidechain of Ethereum and provides a suitable environment
for developing decentralized applications (DApps) and trading with low fees.
Layer 2 integration: Polygon is not only a sidechain but also a platform for various Layer 2
solutions, including Plasma and zk-Rollups, to improve performance and scalability.
Binance Smart Chain (BSC)
dApps and trading support: BSC is a sidechain of the Binance exchange and offers the ability to
run decentralized applications (DApps) and execute transactions with low fees. It has attracted
many projects and users thanks to its convenience and low fees.
Easy integration with Binance Exchange: Since BSC is a Binance product, integration with
Binance exchange is easy, helping the project take advantage of this exchange.
RSK (Rootstock)
RSK (Rootstock) is a sidechain for Bitcoin’s blockchain (Bitcoin Blockchain) designed to
support smart contracts and decentralized applications on the Bitcoin platform.
Rootstock allows tight integration with Bitcoin, using 25 validators to control the two-way peg
of transactions from Bitcoin to rootstock and vice versa. Rootstock supports smart contracts.
Easy integration with existing Bitcoin, and the potential for decentralized finance (DeFi)
applications. Rootstock uses a merge-mining mechanism to ensure safety and reliability.
The Liquid Network
The Liquid Network is a Bitcoin sidechain developed by Blockstream. It was created to improve
security and speed in making Bitcoin transactions.
Liquid Network allows transactions to be confirmed faster and more securely than the main
Bitcoin network, while also supporting the issuance of custom token assets on the platform.
Liquid also offers interoperability with exchanges and financial services to promote liquidity and
use Bitcoin in more advanced financial applications.

2.3 Components of Blockchain Technology

1. Nodes:
Nodes are individual computers within the blockchain network, and each node houses a copy of
the entire blockchain. They work collaboratively to validate transactions and reach a consensus
on the ledger’s state.
Nodes can be categorized into two types:
- Full Nodes: Full nodes maintain a complete copy of the blockchain, validate transactions, and
participate in the consensus mechanism.
- Lightweight Nodes: Store only a subset of the blockchain and rely on full nodes for transaction
validation.

2. Transactions:

Transactions represent the fundamental interactions within a blockchain network. Whether it's
transferring digital assets, recording data, or executing smart contracts, transactions are the
building blocks of the blockchain. Each transaction contains relevant information, such as the
sender's address, recipient's address, amount, timestamp, and a digital signature for
authentication.

3. Blocks:

Transactions are grouped into blocks, which form a chronological chain of blocks – the
blockchain. Each block contains a set of transactions and a unique identifier called a hash.
The hash of a block is generated based on its content and the previous block's hash. This creates
a chain that links all the blocks together. This interconnection ensures the immutability of the
blockchain.

4. Consensus Mechanism:

To maintain a consistent and agreed-upon state of the blockchain across all nodes, a consensus
mechanism is employed. This mechanism ensures that all nodes validate and agree on the
validity of transactions and the order of adding them to the blockchain. Common consensus
mechanisms include Proof of Stake (PoS), Proof of Work (PoW), and Delegated Proof of Stake
(DPoS). These mechanisms differ in determining which node has the authority to add a new
block to the chain.
Proof of Work (PoW) was the first widely used blockchain consensus mechanism. It requires
users to solve complex computational puzzles, known as mining, before submitting new
transactions to the network.

Proof of Stake (PoS) is a different approach to validating transactions and achieving consensus
in a blockchain network. Unlike PoW, which relies on mining, PoS allows users with a small
amount of cryptocurrency to participate in staking. In PoS, the more cryptocurrency a user holds
and is willing to 'stake' for the network's security, the higher the chances of being chosen to
validate transactions.

5. Smart Contracts:

Smart contracts are self-executing programs running on the blockchain. They encode the rules
and conditions of an agreement and automatically execute when predefined conditions are met.
Smart contracts enable trustless and decentralized execution of agreements, eliminating the need
for intermediaries. They are written in programming languages specific to the blockchain
platform.

Core Components of Blockchain

1. Decentralization:
Decentralization is an elemental characteristic of blockchain technology. It means no single
entity or authority controls the entire network. Instead, decision-making and validation are
distributed across the nodes in the network. Decentralization enhances security, reduces the risk
of a single point of failure, and fosters trust among participants in the network.

2. Cryptography:
Cryptography plays a crucial role in securing transactions and maintaining the integrity of the
blockchain. Public-key cryptography is commonly used for identity verification and creating
digital signatures. Private keys, held by individuals, are used to sign transactions. On the other
hand, public keys are used to verify the signature's authenticity. The secure and tamper-resistant
nature of cryptographic techniques ensures the immutability of transactions.

3. Immutable Ledger:
Immutability is a key attribute of blockchain. Once a block is added to the chain, it cannot be
modified or deleted. The cryptographic linkage between blocks ensures that any change to a
block would require the consensus of most nodes. Immutability provides a transparent and
auditable history of transactions, making the blockchain a reliable and tamper-proof ledger.

4. Distributed Database:
The blockchain ledger is distributed across all nodes in the network, creating a decentralized and
distributed database. Each node has its copy of the entire blockchain, ensuring redundancy and
resilience. This distributed nature enhances the security and availability of the data, as there is no
single point of failure. Even if some nodes fail or are compromised, the network remains
operational.

5. Tokenization:
Tokenization involves representing real-world assets or rights on the blockchain as digital
tokens. These tokens can represent ownership of physical assets, voting rights, or even access to
a specific service. Tokenization enables the creation of decentralized applications (DApps) and
the representation of value on the blockchain. Popular examples include cryptocurrencies like
Bitcoin and Ethereum's Ether.
6. Interoperability:
The ability of different blockchain networks to seamlessly communicate and interact is called
interoperability. Standards and protocols facilitate interoperability, transferring assets and data
across different blockchain platforms. Interoperability is essential for the growth of the
blockchain ecosystem, enabling collaboration between different projects and expanding the
potential applications of blockchain technology.

2.4 Distributed identity: Public and private keys, Digital identification, and
wallets:

Public key:

A public key is used in public key cryptography, also known as asymmetric cryptography. It
is openly shared and used to encrypt messages or data that can only be decrypted by its
corresponding private key. This ensures secure communication by allowing anyone to send
encrypted messages that only the intended recipient can decrypt.

Private key:

A private key is used in symmetric cryptography, where the same key is used for both
encryption and decryption. It is kept confidential and known only to the authorised parties
involved in secure communication.

Digital identification:

Digital Identity:

Digital Identity refers to the representation of an individual's identity in a digital format. This
can include various attributes such as name, date of birth, biometric data, or other personal
information. In a distributed identity system, individuals have the ability to manage their digital
identities without relying on a centralized authority.

Decentralized Identifiers (DIDs):

DIDs are a new type of identifier that enable verifiable, self-sovereign digital identities. Unlike
traditional identifiers, which are often tied to a central authority (like a government), DIDs are
created and controlled by the individual. They are often stored on a blockchain, making them
tamper-proof and easily verifiable.

Decentralized Identifiers (DIDs) are a new type of identifier that enables verifiable, self-
sovereign digital identities, designed to empower individuals and organizations to manage their
own identities without relying on a centralized authority. Key features of DIDs include
decentralization, as they are not tied to any central registry or intermediary and can be created
and managed using decentralized networks like blockchain technology; self-sovereignty,
allowing users to create and control their own DIDs without needing permission from a
governing body; interoperability, which enables seamless identity verification across different
systems and platforms; enhanced privacy, by allowing users to disclose only the necessary
information for specific interactions; and the ability to link to verifiable credentials, facilitating
trusted interactions through digital statements made by issuers about a subject. Governed by the
W3C (World Wide Web Consortium), DIDs are increasingly adopted in various applications
such as digital identity management, authentication, and access control.
 Decentralized identifiers (DIDs) are a new type of identifier that enables verifiable, decentralized
digital identity. A DID refers to any subject (e.g., a person, organization, thing, data model,
abstract entity, etc.) as determined by the controller of the DID. In contrast to typical, federated
identifiers, DIDs have been designed so that they may be decoupled from centralized registries,
identity providers, and certificate authorities. Specifically, while other parties might be used to
help enable the discovery of information related to a DID, the design enables the controller of
a DID to prove control over it without requiring permission from any other party.

Verifiable Credentials:

A verifiable credential is a digital certificate that verifies a specific attribute about an individual
(e.g., age, education, employment). These credentials can be issued by various organizations and
can be stored and presented by the individual using their digital identity. They are
cryptographically secure and can be verified without needing to contact the issuer.

Digital Wallets:

 A digital wallet in the context of distributed identity is a software application that stores users'
public and private keys, allowing them to manage their identities and perform transactions
securely.

 Wallets can facilitate the storage and sharing of verifiable credentials, enabling users to prove
their identity or attributes (like age, citizenship, etc.) without sharing all their personal data.

Types of Wallets:

 Custodial Wallets: Managed by a third party, where the provider holds the user's private keys,
offering convenience but less control.

 Non-Custodial Wallets: Users maintain control of their private keys, enhancing security and
privacy but requiring more responsibility.

 Hardware Wallets: Physical devices that securely store private keys offline, providing an extra
layer of security against cyber threats.

Crypto wallets
 Crypto wallet users get to choose not just the service or vendor that supplies a crypto wallet, but
the deployment approach as well.

There are functionally two core types of crypto wallets: hot wallets and cold wallets. Hot wallets
are generally always on and connected to the internet, while cold wallets, sometimes also
referred to as cold storage, are typically disconnected and only connect online as needed.

Within the category of cold wallets are two primary types:

1. Hardware wallets. With a hardware-based crypto wallet, the private key for the user's
cryptocurrency balance is stored on a physical medium, which is typically a USB drive.
Because it's a secured device that isn't always connected, the hardware wallet ensures a form
of isolation when the user pulls out the key.

2. Paper wallets. A paper wallet is truly a low-tech solution, whereby the user writes down the
public and private key information on a piece of paper.

Within the hot wallet category are three types:

1. Online (web) wallets. Perhaps the most common and widely used form of crypto wallet is
found in online services. With an online wallet, an online service such as a crypto exchange
holds the user's public and private keys. Users access the wallet by logging in to the online
service.

2. Desktop wallets. With a desktop wallet, the cryptographic keys are stored in an application on
a user's desktop system.

3. Mobile wallets. A mobile app can be used to store a user's public and private keys for
accessing and using cryptocurrency.

Custodial vs. noncustodial wallets

Crypto wallet types are either custodial or noncustodial. The fundamental difference between
custodial and noncustodial wallets is control:

 Custodial wallets are crypto wallets in which the custody -- that is, the control and operations
of the wallet -- is managed by a third party. That third party is typically the cryptocurrency
 exchange itself, where users buy and sell cryptocurrency tokens and other crypto assets. The
custodial wallet provides users an easy on-ramp for holding crypto assets and is directly
offered by a custodian or exchange.

 Noncustodial wallets are crypto wallets where the custody is held by the individual who has
the private keys for the crypto assets on the blockchain and is responsible for securing them.
Noncustodial wallets include paper wallets, as well software wallets, that are managed by
users.

Advantages of Distributed Identity

1. Enhanced Privacy: Users control their data and can share only what is necessary.

2. Reduced Fraud: Secure cryptographic methods make it difficult for unauthorized users
to impersonate someone else.

3. Interoperability: Distributed identity solutions can work across various platforms and
services, improving user experience.

4. User Empowerment: Individuals have ownership and control over their identity,
reducing reliance on central authorities.

Challenges and Considerations

1. Usability: The technology can be complex for non-technical users, leading to challenges
in adoption.

2. Regulatory Compliance: Navigating regulations surrounding identity verification and

data privacy can be complex.

3. Security Risks: While distributed identity can enhance security, users must take care to
protect their private keys from theft or loss.

4. 5.2 Blockchain Technologies 123

5. Fig. 5.1 The structure of a Blockchain. A block is composed of
a header and a body, where a
6. header contains the hash of previous block, a timestamp,
Nonce and the Merkle root. The Merkle
7. root is the root hash of a Merkle tree which is stored in the
block body. We denote a transaction as
8. TX and take the 3-th block, which only contains four
transactions, as an example to illustrate the
9. structure of a Merkle tree
10. l
11. 5.2 Blockchain Technologies 123
12. Fig. 5.1 The structure of a Blockchain. A block is
composed of a header and a body, where a
13. header contains the hash of previous block, a timestamp,
Nonce and the Merkle root. The Merkle
14. root is the root hash of a Merkle tree which is stored in
the block body. We denote a transaction as
15. TX and take the 3-th block, which only contains four
transactions, as an example to illustrate the
16. structure of a Merkle tree
17. l
 Data structure of a blockchain

A blockchain maintains a continuously growing list of records called blocks. These blocks are
linked and secured using cryptography, and each block contains a cryptographic hash of the
previous block, a timestamp, and transaction data.

The data structure of a blockchain is designed to ensure the security, transparency, and
immutability of the data it stores. It consists of a chain of blocks, where each block contains a list
of transactions and a link to the previous block. This creates a tamper-evident record of all
transactions on the blockchain.

Blockchain Data Structure

Constituents of Block Header are :

1. Timestamp
2. Version
3. Merkle Root
4. Nonce
5. Previous Hash

Size Field Description

 Size Field Description

4 bytes Version A version number to track software/protocol upgrades.

32 Previous Block A reference to the hash of the previous (parent) block in the
bytes Hash chain.

32 A hash of the root of the merkle tree of this block’s

Merkle Root
bytes transaction.

4 byttes Timestamp The approximate creation time of the block.

4 bytes Nounce A counter used for the proof of work algorithm.

Timestamp :
Timestamp in the blockchain is used as proof that the particular block is used at what instance
of a time, also this timestamp is used as a parameter to verify the authenticity of any block.

Version :
It states the version that the particular block is using, there are three types of Blockchain
version.

1. Blockchain Version 1.0(cryptocurrency)-It used a public ledger to store the data, for
example, Bitcoin.
2. Blockchain Version 2.0(smart Contract)- It is called smart contracts which is self-executing
programs, for example, Ethereum.
3. Blockchain Version 3.0(DAPPS)- It is used to create a decentralized structure, for example,
tor Browser.
4. Blockchain Version 4.0(Blockchain for Industry)- It is used to create a scalable, affordable
blockchain network such that more people could use it.
Merkle Root :
A Merkle root uses mathematical formulas to check if the data is not corrupted, hacked, or
manipulated. For example, Suppose one block has 10 transactions, then to identify that block
 we need 10 transactions to combine and form one Hash Value, so it uses the concept of the
binary tree to create the hash of the block and that value is called the Merkle Root
Nonce :
It is abbreviated as ‘number only used once’ and it is a number which blockchain miners are
finding and on average, it takes almost 10 times to find out the correct nonce. A nonce is a 32-
bit number, having the maximum value as 2^(32) total possible value, so the job of the bitcoins
miners is to find out the correct integer value which is a random integer between 0 and 2^(32),
so it becomes computationally expensive.

Previous Hash :
As Blockchain is a collection of several interconnected nodes also called a block, so previous
hash stores the hashed value of the previous node’s address, First block in the blockchain is
called the Genesis Block and has no previous block hash value.

Block in a Blockchain–

 Blockchain is a linear chain of blocks.

 Each block contains a set of transactions and other essential details.

 Blocks are linearly connected and cryptographically secured.

 Each block header contains the previous block hash, current block hash, nonce, Merkle
root, and other details.
 All blocks are connected linearly by carrying the hash of the previous block.
 The previous block hash is used to compute the current block hash.
 The first block with no previous block hash is called “Genesis Block.”
 For adding a new block to the network, the blockchain follows consensus
mechanisms like proof of work (PoW), proof of stake (PoS), etc.
Structure of a Block
a conceptual image of a block with reference to a ledger of transactions.

The above image will create a simpler conceptual block visualization in your head. However, the
actual block contains a lot more information than the ledger image above.
Following are the significant elements of a block –
Block Height –
It’s the sequence number of the block in the chain of blocks. Block Height: 1 is the genesis
block (first block in the network).
Block Size –
It’s a 4-bytes or 32-bit field that contains the size of the block. It adds size in Bytes. Ex – Block
Size: 216 Bytes.
Block Reward –
This field contains the amount rewarded to the miner for adding a block of transactions.
Tx Count –
The transaction counter shows the number of transactions contained by the block. The field has
a maximum size of 9 bytes.
Block Header –
The Block header is an 80-Byte field that contains the metadata – the data about the block.
Let’s briefly discuss the 6 components of the Block Header.
 Time – It’s the digitally recorded moment of time when the block has been mined. It is
used to validate the transactions.
 Version – It’s a 4-bytes field representing the version number of the protocol used. Usually,
for bitcoin, it’s ‘0x1’.
 Previous Block Hash – It’s a 32-bytes field that contains a 256-bits hash (created by SHA-
256 cryptographic hashing) of the previous block. This helps to create a linear chain of
blocks.
 Bits – It’s a 4-bytes field that tells the complexity to add the block. It’s also known as
“difficulty bits.” According to PoW, the block hash should be less than the difficulty level.
 Nonce – It’s a 4-bytes field that contains a 32-bit number. These are the only changeable
element in a block of transactions. In PoW, miners alter nonce until they find the right block
hash.
 Merkle Root – A 32-bytes field containing a 256-bit root hash. It’s constructed hierarchically
combining hashes of the individual transactions in a block.