Components of Blockchain: The Foundation of Digital World Transformation

Blockchain technology has transformed how data and transactions are managed today. To understand the core of this revolutionary technology, it is essential to know the components of blockchain, which are made up of several key parts. Each component plays an important role in creating a secure and trustworthy system.

Infrastructure: The Main Components of a Blockchain System

Blockchain is not just a fancy name; it is a complex and organized data architecture. The system consists of units called “blocks” that store various data. When multiple blocks are linked through references, they form a long chain of data (Chain) that proves its own integrity.

The main components of blockchain include three parts: first, Data, which contains the necessary information to be stored. For example, in Bitcoin, this data includes details of digital coin transfers, such as sender, receiver, and amount transferred. Second, Digital Identifier or Hash, which acts like a fingerprint for each block. It is unique, and even a tiny change in the data will completely alter the hash. Third, Reference to the Previous Block (Previous Hash), which links each block to the one before it, forming an unbreakable and unchangeable chain.

To clarify, consider an example of Bitcoin with three connected blocks: the first block has a hash of A24 and contains a transfer of 5 BTC from user A to user B, referencing 000 (the genesis block). The second has a hash of 12B, records a transfer of 3 BTC from B to C, referencing A24. The third has a hash of 5C3, records a transfer of 2 BTC from C to D, referencing 12B. If someone tries to alter the data in the second block, its hash will change, which invalidates the reference in the third block, making the entire chain invalid and rejected by the system.

Security Mechanisms in Three Layers

The strength of blockchain against tampering is not due to a single structure but a combination of three protective mechanisms working together.

First Layer: Hash Code System

As mentioned, hashes create a digital fingerprint for each block. Hashes are one-way functions; they cannot be reversed or distinguished. To produce the same hash, the data must be identical in every detail. Since finding the correct hash requires enormous computational power, forging data is nearly impossible.

Second Layer: Consensus Mechanism

Beyond hashes, blockchain employs a consensus mechanism to ensure all participants agree on new blocks before adding them. Bitcoin uses Proof-of-Work (PoW), which takes about 10 minutes to solve complex mathematical puzzles to create a new block. To hack Bitcoin, an attacker would need to alter hundreds of blocks’ hashes, which requires an enormous amount of computational power. With limited time, this task becomes practically impossible.

Third Layer: Peer-to-Peer (P2P) Network

Blockchain’s integrity also depends on a P2P network, a revolutionary concept. Instead of a central authority, all users become system protectors by running nodes. Each node stores a full copy of the blockchain and participates in validation.

When a new block is created, all nodes (1) receive the data, (2) verify its correctness, and if valid, (3) add it to their chain. To control the system, an attacker would need to control over 51% of the nodes simultaneously, which is extremely difficult given the thousands of nodes worldwide. Therefore, attempting to manipulate the blockchain involves changing many blocks, redoing proof-of-work, and controlling the network—an almost impossible task.

Types of Blockchain Networks and Their Uses

Not all blockchains are the same; they vary depending on who controls and who can access them. They can be classified into four types:

Public Blockchain

Open to everyone for participation, verification, and data storage. Examples include Bitcoin, Ethereum, and Solana. No permission is required, and no single entity owns the network, ensuring maximum transparency. However, the downside is slower processing speeds due to the need for all nodes to verify transactions.

Private Blockchain

Controlled by a single organization, only authorized members can join. Examples include Hyperledger Fabric and MultiChain. This type offers higher speed and better control but carries increased internal risks of centralization.

Hybrid Blockchain

Combines public and private features. Examples include XinFin and IBM Blockchain Platform. Some data is kept private, while other parts are open for verification. Managing such systems is more complex.

Consortium Blockchain

Governed by a group of organizations working together. Examples include R3 Corda. This balances decentralization and management costs but requires coordination among multiple parties.

Strengths and Challenges of Blockchain Technology

Clear Advantages

Enhanced Security: Once data is encrypted and stored in a block, it cannot be easily deleted, modified, or forged.

Transparency: The absence of a central intermediary allows all transactions to be verified without trusting any single party.

Cost Savings: Eliminating middlemen like banks or logistics companies reduces transaction fees.

Traceability: The origin of data or products can be tracked precisely.

High Efficiency: Reduces human errors, making processes faster and more reliable.

Concerns to Watch

Scalability Issues: Current blockchains cannot handle large volumes of transactions simultaneously, leading to slower processing.

Theoretical Risks: While practically difficult, theoretically, a 51% attack could occur if someone controls most nodes.

High Energy Consumption: Especially for PoW systems like Bitcoin, which require enormous energy for mining.

Regulatory Uncertainty: No clear regulations currently exist, creating uncertainty for official adoption.

Real-World Applications

Financial Industry

Banks are exploring blockchain use cases, such as Thailand’s “Inthanon” project by the central bank to develop a digital Baht, enabling faster interbank transactions. JMART has developed JFIN, which uses blockchain to store customer data and credit scores.

Supply Chain

IBM’s Food Trust Blockchain allows consumers to verify the origin of ingredients and products, such as confirming whether fish was caught sustainably, promoting environmental conservation.

Voting Systems

Blockchain can create high-integrity voting systems that prevent fraud and ensure transparency.

Decentralized Finance (DeFi)

Ethereum is the leading platform for building decentralized financial systems, such as Uniswap and Aave, enabling users to lend, borrow, and earn interest directly without intermediaries.

Summary: Understanding Blockchain Components in the Digital Age

Today, blockchain is not just a technology for cryptocurrencies but a fundamental mechanism capable of transforming various industries. Deep understanding of blockchain components—from data structure, hashes, previous hashes, to security mechanisms like consensus and P2P networks—enables accurate assessment of its potential and performance. Despite current challenges related to speed, energy consumption, and regulation, the future of blockchain is full of opportunities. Welcome to the world of this revolutionary technology.