Blockchain Development | Key Concepts of Blockchain (2024)

Blockchain technology was introduced to disrupt the financial sector. Many financial institutes and banks have leveraged blockchain to make transactions secure and remove intermediaries.

But blockchain technology is not only restricted to the finance sector. From automobile to retail, healthcare, manufacturing, and travel, every industry is investing in blockchain to avail its benefits.

The technical concept behind the blockchain is similar to that of a database, but the interaction with that database is entirely different.

For developers willing to learn blockchain development, it is essential to understand how they will write software applications in the future and how different blockchain concepts like consensus, trusted computing, smart contracts, and file storage systems interact with one another in a decentralized environment.

To make you learn how to develop blockchain applications or to implement blockchain development in businesses, we have covered the following ground:

• Basics of Blockchain
• Concepts which are prerequisite for blockchain
• Blockchain consensus algorithms
• Blockchain Tools
• Blockchain Platforms

Understanding the basics of Blockchain Development

If you are a beginner, you should be familiar with the following terms:

• Blockchain
  
  The blockchain is an incorruptible chain of blocks where each block contains data of value which is validated by all nodes in the network, not by any central authority. Each block in the chain includes its hash value and that of the previous block which acts as a unique fingerprint so that no one can tamper with data stored in it.The information stored on the blockchain can never be deleted or altered. Instead, a new block needs to be added to the chain to update the information.
• Decentralized
  
  A blockchain is said to be decentralized as it is not stored in one place and does not have a center. Instead, the data saved in blockchain is distributed across many different computers, called as nodes.Since no single entity has control over the data, users interact with each other directly without the involvement of a third party.
• Decentralized Consensus
  
  A blockchain is a decentralized peer-to-peer system which has no central authority to control the exchange of information. Though no involvement of a central administrator keeps the system devoid of corruption, it raises the following questions:
  1. How is a decision made in the blockchain?
  2. How is a transaction added to the chain of blocks?

  In a normal centralized model, a central authority or a board of decision-makers take all the required decisions. But it is not possible in the case of blockchain as it has no leader.

  The members of a blockchain network need to come to a consensus via “consensus mechanisms” to make decisions. We shall discuss some of the significant consensus algorithms in detail.

• Smart Contracts
  
  Smart contracts are the building blocks for blockchain-based applications. The concept behind smart contracts is the contractual governance of transactions between two or more participants. It can be verified programmatically with the blockchain, instead of a central authority.Also, smart contracts allow users to control ownership by offering controlled data disclosure.
• Mining
  
  Mining is defined as the process of adding or validating transactions to the distributed ledger. It mainly involves creating a hash of a block that cannot be forged. As a result, it protects the integrity of the entire system without needing a central system. Miners are the users who utilize the computational power to mine for blocks.

Learning the basics of decentralized technology is not enough, there’s a lot to understand before moving to blockchain development. Let’s discuss some of the concepts which are common yet important for every blockchain enthusiast.

Following are some of the important concepts that are prerequisite for theblockchain development

• Programming Language-C, C++, Java, JavaScript, Python and Solidity.
• Data Structures-Linked List, Hyperledger, Acyclic Graph, HashTable and Associative Array.
• Security and Encryption-Secure Hashing Algorithm, Private Key and Public Key Pair.
• Networking Concepts-Multi-Threading and Socket Programming.

Whether you are a learner, innovator or entrepreneur, you should also know about the different blockchain consensus algorithms on the basis of which a blockchain platform can be chosen to build a dApp (decentralized application).

Mentioned below are some of the blockchain consensus algorithms which can be used forblockchain development

• Proof of Work
  
  Proof of Work is the first consensus algorithm introduced in the blockchain network. It is used by various blockchain technologies to validate the transactions and add relevant blocks to the chain of a network. As a decentralized ledger contains all information related to the blocks, it is essential to take care of all transactional blocks.

  It is the responsibility of miners to manage the transactions blocks which can be done with the process of mining. The concept behind this technique is to solve complicated mathematical problems and provide a solution. Since it requires a lot of computational power to solve a mathematical problem, proof of work has certain limitations. More a network grows, more the power is required.

  Firstly, miners have to solve the puzzles to create new blocks and confirm the transactions. The complexity of a puzzle depends on the maximum number of users, overall load and the minimum current power of the network.

  Bitcoin is the most common platform where proof of work algorithm is implemented. Ethereum also used the same consensus in 3-4 big projects, but now it has moved on to Proof of Stake.

• Proof of Stake
  
  Proof of stake is a blockchain consensus algorithm, designed to overcome the drawbacks of the proof of work algorithm.

  In Proof of Stake algorithm, each block gets validated before another block is added to the ledger. Miners can participate in the mining process with their coins to stake.

  The algorithm has introduced a new type of concept where everyone can mine or validate new blocks based on the coins they hold. So, the more coins an individual has, the more are the chances to become a miner.
  The miners of the network are chosen randomly. If an individual has a specific amount of coins stored in the wallet, then he is qualified to act as a node on the network.

  After becoming a node, an individual needs to deposit a specific amount of coins to be qualified as a miner. Voting is done to choose the validators.

  Then, the miners can stake the minimum amount needed for the special wallet staking.

  New blocks get created which are proportional to the number of coins in the wallet. For instance, if a person owns 10% of all the coins, he can only mine 10% of the new blocks.

• Proof of Elapsed Time (PoET)
  
  PoET is one of the best consensus algorithms, designed for permissioned blockchain network where you require permission to access the network.

  The mining rights or voting principles are decided by the permissions networks.

  Since the network requires identification of the miners, the consensus algorithm ensures a secure login into the system.
  Therefore, PoET gives a chance to choose the winners via a fair means only.

  The algorithm relies on a special CPU requirement, called “Intel Software Guard Extension”. The Software Guard Extension helps to execute unique codes within the network. Using this system, it ensures that the winning is purely fair.

• Practical Byzantine Fault Tolerance (PBFT)
  
  PBFT focuses on the state machine. It replicates the system but avoids the main Byzantine general problem.

  Now, the question is how PBFT consensus works?

  See Also

  Blockchain 4.0

  The algorithm assumes from the start that the network could have possible failures and independent nodes might not work properly at certain times.

  So, PBFT is designed for asynchronous consensus systems and optimized in an efficient way to deal with the above issues.

  Moreover, all the nodes in the system are arranged in a particular order.

  Out of all the nodes, one node acts as the primary node while others work as the backup plan. However, all the nodes in the system perform their functions in harmony and interact with one another.

Once you understand the basics of blockchain development, it is the time to understand the various tools that contribute to the blockchain development.

Following are some of theblockchain development tools which can help ease the development process

1. Geth
   
   Geth is a command line interface, used to run a full Ethereum node in Go. The tool is designed to implement an Ethereum node in the Go programming language.By installing and executing Geth, a user can perform the following tasks
   • Mine Ether tokens.
   • Create smart contracts and send transactions on the Ethereum Virtual Machine.
   • Transfer funds between addresses.
   • Track the block history.

   Operating systems such as Linux, Mac, and Windows support the installation of Geth. Also, this command line interface supports two types of installations, i.e., Binary and Scripted.

   Using Geth, it can be possible to connect to the existing live blockchain and create its blockchain on the basis of provided settings.

2. Mist
   
   Before the development is started using Ethereum, it is essential to have a place where Ether tokens can be stored and smart contracts can be executed. Mist is a program which is connected to Geth in the background and acts as an interface for the wallet.

   Though Mist is widely used for smart contract deployment, you must remember one thing. It is a full node wallet, i.e., one has to download the entire Ethereum blockchain, which is >1Tera Bytes (TB).Mist is supportable on Windows (both 32- and 64-bit), Linux (32- and 64-bit) and Mac. After the node gets fully synced, you will have an option to operate on the testnet or the mainnet.

3. Remix
   
   Remix is a suite of tools which has been designed to communicate with the Ethereum platform. It is used to debug transactions saved in the Git repository.

   A developer needs to connect with an Ethereum node to use tools hosted by Remix.

   Remix is comprised of the following tools

   • remix analyzer
   • remix-lib
   • remix-debug
   • remix-tests
   • remixd
   • remix-solidity

   Remix IDE is a browser based compiler that allows users to develop Ethereum smart contracts with Solidity language. It also supports testing, deploying and debugging of smart contracts.

4. Solc (Solidity Compiler)
   
   Solidity is a loosely-typed language which has a syntax similar to that of ECMAScript used for creating the smart contracts on Ethereum blockchain. The role of Solc is to convert the solidity script into a format readable by the Ethereum Virtual Machine.

   Solidity Compilers are of two types

   • solc : Coded in C++
   • solc-js : Uses Emscripten to cross-compile from solc C++ to JavaScript

   Though both of the above compilers are built from the same source code, they come up with the different results.

5. Blockchain Testnet
   
   While writing any program for Ethereum Virtual Machine (EVM), it is important to consider the following things:

   First, a user has to pay for gas usage and the launch of an application. So, no one would like to pay money for a project that has not been tested.

   Secondly, an untested code can have some bugs which can create havoc to the Ethereum blockchain. Also, the information stored on Ethereum blockchain is immutable which cannot be undone.

   Therefore, it is good to test a dApp before deploying it on the mainnet. Testnet is quite similar to the Ethereum blockchain which allows developers or users to test the application before deployment.

Here are the top blockchain platforms that supportblockchain development

• Ethereum
  
  Ethereum is an open-source blockchain based distributed computing platform founded by Vitalk Buterin in late 2013. Known for executing smart contracts on the custom-built blockchain, Ethereum uses EVM (Ethereum Virtual Machine) to offer the run-time environment.

  No doubt that Ethereum a permissionless (public) blockchain platform, it is built for mass consumption versus restricted access. It has a native cryptocurrency called Ether, which is used to fuel the Ethereum ecosystem. A developer who builds the app on the top of the Ethereum platform has to pay in Ethers to execute transactions and run nodes.

  Since Ethereum uses PoW(Proof of Work) consensus algorithm, its speed is comparatively slower as compared to other platforms.

• Hyperledger Sawtooth
  
  Hyperledger Sawtooth is a modular and enterprise-grade blockchain development platform which can be used to create, execute and deploy distributed ledgers to maintain digital records in a decentralized way.

  PoET (Proof of Elapsed Time) consensus algorithm allows Hyperledger Sawtooth platform to integrate with hardware security solutions. Offering a solution to the Byzantine Generals Problem, PoET utilizes the trusted execution environment which enhances the efficiency of existing algorithms like Proof of Work.

  Its modular architecture enables applications to select the transaction rules, consensus algorithms, and permissions as per the business needs.

• Hyperledger Fabric
  
  Intended to build blockchain based applications with a modular architecture, Hyperledger Fabric is another project of Hyperledger designed for permissioned networks. It only enables authorized identities to participate in a blockchain ecosystem.

  The architecture of Hyperledger Fabric allows the team of network designers to plug in the preferred components such as consensus and membership services, separating it from other blockchain platforms.

• EOS
  
  Designed and developed by a private company, Block.one, EOS is a blockchain platform that supports the development of decentralized applications (dApps).

  EOS blockchain solution solves the issues of scalability with Ethereum and Bitcoin by offering smart contract capability, decentralized storage of enterprise solutions and hosting services. Transactions to be added to the EOS network accomplish consensus with a delegated proof-of-stake algorithm and multi-threading.

• Hedera Hashgraph
  
  Based on Directed Acyclic Graph, Hedera Hashgraph is a fast, secure and fair Distributed Ledger Platform that does not require computing a heavy proof of work algorithm.

  The transactions to be added to the network are validated via Gossip about Gossip and Virtual Voting consensus algorithm.

  Using virtual voting consensus, Hedera Hashgraph platform can perform hundreds of thousands of transactions and verify around one million signatures in a second.

To learn more about the concepts of blockchain development and how we are integrating blockchain to enhance business operations across multiple domains,contact usand discuss your requirements.