Elements that make a blockchain

Blockchain is a powerful, decentralized, revolutionary technology that can overpower the existing computing technologies. Built upon a peer to peer framework,  this disruptive technology assures infallible security, transparency and immutability. Moreover, the characteristics of blockchain make interoperability possible across networks enabling instantaneous communications beyond the geographical confines.

Thus the question arises: What are those underlying components residing at the core that form the basis of the outstanding features of this promising technology? 

The blockchain infrastructure is a mishmash of hardware and software, core elements that are the fundamentals of distributed ledger technology. The multi-layered technology has certain vital elements that are crucial to the working of proof of stakes blockchain networks, which are.

• Nodes and clients
• Blocks
• Consensus algorithms such as Proof of Work and Proof of Stake
• Miners

Blockchain elements are intervening components that work as well oiled machines with a secured framework and mammoth-sized data storage systems. This is where cloud computing and cloud storage figure in. The malleable cloud technology has wholly outfitted the computing operations enabling users to access and manage data hosted on remote servers. Merging blockchain technology with cloud systems helps successfully implement blockchain solutions and upgrade the functionality and security of the DLT. Blockchain Platform-as-a-service providers play a crucial role in catering to both requirements – infrastructural hardware and software on the cloud, leaving developers without a worry about installing and maintaining blockchain infrastructure and data access and storage issues. 

Let’s dig a little deeper and discuss the chief operational components of blockchain technology with a primary focus on the Platform-as-a-service model and blockchain managed services providers. 

Nodes and Clients

Node is a high-powered electronic device connected to a blockchain network in simpler terms. It can be any device like a computer, phone, or tablet. Blockchain aims to store and manage data accessible to all parties involved while ensuring the security of the highest order. But to prove and ensure data credibility, it is stored across multiple systems spread around the globe connected to the blockchain network. These systems collectively are referred to as the “nodes”.

In one sentence, nodes are interconnecting, purpose-driven electronic devices that record, store, and validate data over a blockchain. 

Why are nodes an integral part of a blockchain, and how do they work in tandem with other elements?

A node performs a myriad of functions, from storing data to validating transactions and blocks. Their role in distributed ledger technology can vary depending upon their functionality. Let’s dig a little deeper to understand how they intervene with other elements present in the blockchain.

A block in the blockchain can be compared to lego blocks that are pieced together to form a bigger block. These blocks store information in the form of encrypted data. For instance, every block stores records of the transactions added to the current block after verification. The verification process is facilitated by blockchain concepts such as cryptography, hashes, and consensus. Thus verified data is added to the block, and once a block is complete, it is finally added to the blockchain network. The authenticated block is linked to the previous blocks forming a chain. But the whole nine yards cannot be crossed without the help and presence of nodes. 

A block contains the following protocols

• Timestamp
• Transactions
• Merkle Tree
• Nonce
• Cryptographic hash 

Nodes functionality

The blockchain concept relies on data distribution, making it a decentralized platform, and nodes are elemental to the process. They run on peer-to -peer protocol which permits them to communicate with their corresponding nodes, broadcast, and cross-check new information added to the network. The cross-checking is done via consensus, and the node handlers get rewarded for their efforts. Therefore factors like data distribution and storage on multiple nodes make the blockchain a decentralized system in the true sense. Also, node functionality depends largely on the type of blockchain ( private, public, and consortium). And secondly, the necessities of the blockchain network they work for. 

Clients in blockchain

In a blockchain, Clients are the software that aids the nodes’ functionality and enables node users to access and connect with blockchains. Under P2P protocol, clients help various nodes under one gambit interact with each other. For instance, Ethereum has various open-source execution clients apart from the hugely popular Geth, short for Go Ethereum. These clients have been developed by several teams of third party developers using different programming languages. 

Types of Nodes

There are two types of nodes – Full nodes and Light nodes. They are further divided into subcategories. 

1. Full nodes are the boss nodes with server-like capabilities of storing the complete history of a blockchain while keeping a consensus between various nodes and validating transactions and blocks. Full nodes also have the authority to vote for the future of a network. If the majority of nodes dismiss a proposition, it gets bypassed, creating a situation similar to Bitcoin Crash Fork. 

         Full nodes are again divided into two subcategories.

• Pruned nodes: Although there is no defined limit as to how many blocks can be added to a blockchain, nodes have a set memory limit that restricts the number of blocks that the full nodes can store. So to store new blocks, you need to delete the older ones. This is how a pruned full node works. It downloads a block from the beginning, and upon reaching the limit, it deletes the predeceasing blocks while retaining only headers. They like full nodes and use consensus algorithms to verify transactions.

• Archival full nodes: They work pretty much like full nodes with sever-like capabilities hosting the entire blockchain database. The only difference between the archival and pruned nodes is the hard disk memory space availability. 

Archival nodes are further subdivided into block adding nodes, also called participant nodes. 

• Miner nodes: Nodes native to the consensus algorithm such as Proof of Work. They solve complicated mathematical algorithms using immense electric and computing power. Upon solving, the transaction gets validated and gets added to the block. For performing such tasks, node miners get rewarded with tokens. 

• Staking nodes: Proof of Staking is another type of consensus that works differently from traditional POW through bitcoin mining. In comparison, the staking methodology requires nodes to stake coins and validate transactions. Rewards largely depend on the amount of stake and stroke of luck. Staking relies on a set of predetermined rules and coinage, which means how long you have been holding crypto and the number of coins in your wallet in proportion to the coins in the network. The prerequisite of staking is keeping the crypto wallet online round the clock using devices like Raspberry Pi. We will be discussing more about staking and the concept of StaaS (staking as a service) and the role of StaaS providers later in the blog. 

• Authority nodes: There is no restriction over the number of nodes joining a blockchain network. Still, in some cases, for instance, access to data is limited to fewer nodes in private blockchains. To determine which node gets the access, authority notes are employed. Private blockchains like Hyper Ledger and Corda utilize services of authority nodes to grant permissions to nodes involved in nodal activities. 

• Master nodes: These are the full nodes whose primary purpose is to keep transaction records and validate them. Master nodes don’t have the authority to add new blocks. Nodes involved are required to be online 24*7, stake coins and host virtual servers. 

Light nodes

Light nodes, also referred to as SPV (simplified payment verification nodes), are lite versions of full nodes that connect to the latter. They typically are downloaded crypto wallets that only keep necessary information and are involved in the validation process. In addition, they store block headers enabling faster transactions. 

• Lighting nodes: Lying somewhere between full nodes and light nodes, lighting nodes work outside the gambit of the blockchain. These third-party nodes establish a connection between users to curtail heavy load traffic on the blockchain. In addition to solving traffic issues, these nodes encourage faster transactions and cut down intervening factors and transaction costs. 

How to deploy a node and the challenges involved

Deploying a node can be an arduous task, especially when it comes to matching hardware specifications to crypto coins. Then comes the software requirements. For instance, If we consider node deployment on Ethereum, various clients are developed and maintained on the Ethereum foundation.  

Take an example for node deployment using Geth, a software that is the most used client on Ethereum. Written in Go programming language, it promises to be fast, light and secure, properties that make deploying a node relatively more straightforward. 

Deploying a node on Geth comes with the following hardware prerequisites.

• Updated or latest OS versions of Windows, Linux or macOS. 

• Minimum 8 GB RAM and 500 GB SSD storage is required. However, with constant development in blockchains, storage requirements keep up shooting, so upgrading RAM is crucial for faster transactions and validation process

• High-speed broadband connection

For self node deployment, one needs to be a qualified System administrator to set system configurations and flag configurations. In addition, minimum de facto cyber security skills are necessary to ward off cyber threats and maintain system security.

Then comes the software installations where you need proficiency and knowledge of programming languages to write specific codes.

Determining the type of node has its own set of specifications. For example, synching an Ethereum node to the blockchain is primarily done in “full” mode. So you don’t have to download the whole transaction history or smart contract codes. However, running a full node is expensive and requires optimum hardware. 

Running an archival node and synching to Ethereum through SSD is a painstakingly long process, and in case of error, the whole synchronization goes awry, and you need to start from zero, which again can lead to increased costs. Furthermore, using HHD has its own set of issues due to the disparity between the speed of blockchain disk writing speed which is comparatively lower.

Light node Ethereum synchronization is the best alternative but is plagued with errors. 

A node can be connected to the main server or run in test mode to study the deployment process. However, running a node without appropriate skills and equipment is not possible. Even with the technical knowledge, there is a lot of trial and error involved, which can be time-consuming and eat into your budget. 

To summarize, the challenges you may face while channeling node deployment are as follows.

• Interrupted internet supply and low bandwidth

• Increased costs mainly due to bottlenecks and recurring errors

• Cyber hacking by third party users 

• Expensive hardware equipment

What is a Blockchain platform as a service, and how does it facilitates blockchain solutions

We have already pondered the difficulties encountered while running a node and synching with a blockchain. On the other hand, blockchains are seeing widespread adoption, especially in mining and staking. As a result, BaaS is becoming a favorite choice amongst blockchain companies and individuals alike to fill the technical and logistical gaps. Primarily focussing on BPaaS, a blockchain platform as a service, this service model is an ideal choice. It provides open-source blockchain solutions to developers for developing, executing and managing blockchain applications; whether its hardware infrastructure or software applications, cloud services cover all bases. 

Blockchain as service provider 

Increased blockchain usage has caused many cloud service providers to introduce BaaS services. Node service offerings are essential in a BaaS service provider’s portfolio. They make all the key resources available to set up infrastructure and use appropriate technologies to install, integrate, monitor and maintain nodes connected to the blockchain. 

Businesses and individual developers benefit from the services as one; they could concentrate on developing business strategies rather than worry about systems maintenance, software adaptations and thwarting cyber threats. BPaaS providers take care of all the fundamentals ensuring smooth node functionality. 

Blockchain as a service benefits 

Before categorizing the benefits of undertaking Blockchain as a Service, it’s important to understand how they tower over the in-house or on-premise blockchain applications development. Installing your own node is possible, but not without dealing with the complications which occur due to:

• Technical issues such as system configurations 
• Lack of experience and expertise for efficient deployment
• Inflated operational and managerial costs

Now, if we compare self node deployment costs to that of a BaaS service provider, which depends on the following influencers:

• More pocket friendly: BPaaS models are more economical as the cost incurred depends on the service provided. Developers save money that could have been spent on infrastructure upgradation, software updations and system replacements in self-deployment. Availability of BPaaS services makes the whole process more cost-effective.

• Proactive response: Blockchain applications are prone to issues that develop from time to time. BPaaS providers promptly respond to the stress calls to such issues saving developers from the headache of dealing with recurring infrastructure or software issues, maintaining the stability of a node and timely software updates. Moreover, BPaaS providers make sure that clients have accessibility to all blockchain applications such as software, operating and security systems, etc. 

• Timesavers: Installing blockchain applications, especially nodes is a tedious and lengthy process, often aggravated and prolonged with various technical issues. Seeking services, BPaaS vendors considerably saves time and enables quicker and smoother installations.

• Scalability: BaaS vendors emphasize integrating flexible, customized solutions with scalable qualities and are tuned to the customer’s requirements. 

• Assured security: BaaS services are outsourced from cloud systems which is a secured platform, and vendors come packing with the technical expertise of deflecting cyber attacks.

Proof of stake consensus mechanism

What is the similarity between Ethereum, Polkadot, Cardano, and Solana? They are all second and third-generation blockchains that run on Proof of Stake consensus mechanisms. Proof of Work, the original consensus used for bitcoin mining, gave way to staking mechanisms’ development due to its limitations. Proof of stake is the ruling mechanism notwithstanding Ethereum 2.0, also known as the consensus layer, which, when merged with the existing Ethereum, will boost PoS dominance. 

Proof of stake was initially introduced by Peercoin in 2012 and has since been implemented by many other cryptocurrencies. Staking requires node handlers to lock a certain amount of crypto in their digital wallet. The purpose of doing so is to be able to participate in a blockchain network. The more coins you hold, the more chances of being selected as a validator to create blocks in the blockchain and earn block rewards.

Benefits and challenges of PoS consensus mechanism

Proof-of-stake systems are less expensive and less energy-intensive than other consensus mechanisms like proof-of-work. They also do not require specialized hardware, making them more accessible to average users. Other benefits are increased speed of transactions, a high investment rate, and better decentralization as there are more validators than miners in the PoS mechanism. 

However, staking isn’t without challenges, such as low participation chances and is subject to the number of coins staked, leading to centralisation. The maximum coin holder has better control over the network activities. It takes only one validator with 51% stakes to attack the network and disrupt transactions. Moreover, events like slashing can harm your rate of ROI.

Staking as a service 

Staking as a service is becoming increasingly popular to overcome the limitations of staking. StaaS services offer validators a choice to enroll with the help of staking providers such as financial establishments. The staking providers work similarly to investment banking systems that help validators get boosted returns on investments for a fee. 

Here are some benefits of enlisting help from staking providers.

• The better potential return on investment: POS consensus enables crypto holders to earn rewards on a percentage basis. The reward is in proportion with the invested stakes rather than earning through dividends and interests. Therefore, giving validators a chance to make a good amount of ROI. Enlisting STaaS services increase the chances of getting continuous and steady returns as they provide some level of trust or guarantee. Whereas delegating staking to individual validators may lead to uncertainty as they may go offline or cease to operate in future, putting your investments at risk. Usually, StasS providers have insurance against slashing, an event that gets instigated due to punishable offenses triggered by downtime or double signing.

• Reduced barriers: Although staking is relatively easy as any node handler can become an investor or staker. However, new entrants can find navigating the interface confusing, compounded by choosing the right validator services. StaaS helps mitigate these barriers by efficiently handling the staking process and making the experience enjoyable and wholesome. The providers make sure the earnings go into the investors’ wallets which StaaS service providers generally provide.

• Inflation checks and balances: Cryptocurrencies, too, are influenced by inflation like fiat currencies. With an increased supply of a particular coin, the value of coins held by a crypto holder gets adversely affected. StaaS providers counterbalance the effects of inflation by ensuring that the value of currencies in holding remains proportional to the increased inflation caused by the growing supply of a cryptocurrency.

Staking as a service is seeing exponential growth due to the entry of more players into the staking game. However, StaaS institutions must uphold the ethos of decentralization and remain true to their profession, as their actions today will define the future of staking.

Zeeve, your one-stop destination for blockchain solutions

Zeeve as a leading BaaS provider, has helped many web 3.0 startups and established businesses develop, deploy, and manage dApps and blockchain networks. We are a cloud-agnostic, code-free automation development platform. We employ advanced data science to monitor nodes and other blockchain applications. We deploy a dynamic set of APIs for dApps implementation for various use cases to cater to different industries. Zeeve has years of extensive experience developing advanced and all-inclusive blockchain applications for banking and financial establishments. Enlisting Zeeve for blockchain managed services is a sure-shot way of bolstering business to new heights.