Blockchain as a Suit of Technology

Learn how blockchain networks and blockchain transactions are defined in this lesson.

Blockchain network

Blockchain technology was introduced by Nakamoto (2008) in order to allow online payments on the Internet via a purely peer-to-peer system without any central authority. Thus, we consider a distributed, purely peer-to-peer system as described in the “Distributed Systems” lesson and the “Peer-to-Peer” lesson, on which a blockchain network runs. Furthermore, we can assume that the network is an asynchronous system that exhibits behavior as defined in this lesson.

Definition: Blockchain network

A blockchain network is a purely peer-to-peer network of randomly connected, independent nodes, which are controlled by users, forming a homogeneous network without any central control, whereas every node performs the same operations, meaning that each node applies the same blockchain algorithm.

Every user of the network is able to generate any number of addresses by applying the corresponding private and public keys. These key pairs are used in order to interact with the network.

User address

An address is derived from a public key and is used to uniquely identify a user, i.e., a recipient of funds. Depending on the implementation, the address can be the public key itself or a hash of it, as both serve as unique public information.

Normally, the address is derived by applying a hash function on the public key, since the representation of the fingerprint is shorter than the public key itself. Since a blockchain network is a purely peer-to-peer network, all nodes are equally privileged and able to send and receive messages to and from each other. As a consequence, all nodes are able to make transactions with each other, which means that they are able to transfer funds from one to another. Thus, any client is able to send funds to other users by digitally signing a transaction and addressing the recipient by using his address (or public key). Since the transactions themselves are not encrypted and therefore publicly visible in the blockchain, a user usually controls many different addresses in order to operate in a pseudonymous manner (Imran Bashir (2017)Imran Bashir. Mastering Blockchain. Packt Publishing, Limited, 2017.).

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