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Note
If you are new to the field of information technology, taking our Introduction to Information Technology and its Career Roadmaps and Introduction to Cloud Technology with DevOps, Docker and Kubernetes (free self-paced) courses is highly recommended. Also, for a comprehensive coverage of blockchain concepts and its use cases, taking our Introduction to Blockchain Technology course is highly recommended.
Recap
In our previous article (A beginner Guide to Blockchain Technology), we briefly discussed what is the blockchain technology, followed by reviewing its key components.
In this article, we go over how decentralized peer-to-peer networks in general and specifically in blockchain work.
Decentralized P2P network
To explain how blockchain works, let’s look at what steps are involved with the existing business model for completing a simple payment transaction.
A customer, Alice, needs to pay $10 to Bob, who happens to have an account in the same bank as Alice. She can make the payment either by visiting a bank branch or using the web. Let’s say she tries to do that online through the bank’s web portal. She will need to authenticate herself using her username and password and then put the transfer order in and wait for the bank system to confirm whether the transaction is completed.
As shown in the following diagram, in order to support such online banking activities in the traditional world, the bank has to establish an identity and access management system and authenticate Alice’s login credentials. Behind the scenes, the bank needs to develop a bank web portal and a backend system to verify whether Alice has the right account with the bank and has enough money to pay Bob to transfer $10 out of Alice’s account, and put $10 in Bob’s account. The bank has to maintain a ledger to record the details of the transaction in a database and show the balance each person has.
The below diagram shows a centralized bank system model:
As the business grows, customers’ needs change too. The traditional brick and mortar business model is being replaced by the digital banking and commerce model. This requires technology changes in the bank system too. Banks nowadays deploy a distributed system model to serve the ever-growing needs of their customers.
One-to-One Live Blockchain Classes
Coding Bootcamps school offers One-to-One Live Blockchain Classes for Beginners.
The above diagram shows the distributed bank system model:
The fundamental issue with the preceding centralized or distributed system model is a single point of failure. Failure could come from malicious network attacks, system failures, or security and privacy breaches; it could come from business failures in the bank itself, which can cause millions of people to lose their homes due to the bankruptcy of big banks during a global financial crisis. It could happen due to currency failure itself, such as the currency collapse in Venezuela, where the lifetime savings of average citizens suddenly became worthless overnight. Also, the payment may be blocked due to government censorship.
Satoshi Nakamoto believed that the root problem with traditional fiat currency is all the trust required to make it work. Citizens have to trust the central bank not to devalue the currency. Consumers have to trust the bank to manage their money. But history has shown again and again that trust is often breached.
Satoshi designed an elegant decentralized P2P electronic cash system, and the technology behind that, blockchain, is the solution, where transactions are maintained in a distributed shared ledger and replicated across a global P2P network; security and privacy are ensured with cryptographic technologies, and transaction integrity is achieved through a consensus mechanism.
The following diagram shows a decentralized bank system model:
As new transactions are made, they are broadcasted to all network nodes, and over time all transactions that have occurred are sequenced together in the public ledger and made available in all replicated network nodes, as shown in the following diagram:
Now that we understand the differences between centralized and decentralized models, let’s move on to more topics on blockchain architecture.
Next Article
In the next article (How blocks are added to the blockchain), we discuss how a new block of data is added to the blockchain system.
This article is written in collaboration with Brian Wu who is a leading author of “Learn Ethereum: Build your own decentralized applications with Ethereum and smart contracts” book. He has written 7 books on blockchain development.
Resources
Free Webinars on Blockchain
Here is the list of our free webinars that are highly recommended:
- Hyperledger Fabric for system admin versus developers
- How to harness blockchain for environmental and corporate sustainability
- Review of Initial Coin Offering, Security Token Offering and asset tokenization use cases and best practices
- Hyperledger Fabric Deployment on Cloud
- Hyperledger Fabric for entrepreneurship- 21 blockchain business use cases
Free Courses
Here is the list of our 10 free self-paced courses that are highly recommended:
- IT Career Roadmap Explained
- Web Design with Bootstrap
- User Experience Best Practices
- Intro to Search Engine Optimization
- Web Design with WordPress
- Introduction to Drupal CMS
- Intro to Joomla CMS
- Intro to Cybersecurity
- Introduction to Cloud Technology
- Recorded Live Webinars and Classes
Self-Paced Blockchain Courses
If you like to learn more about Hyperledger Fabric, Hyperledger Sawtooth, Ethereum or Corda, taking the following self-paced classes is highly recommended:
- Intro to Blockchain Technology
- Blockchain Management in Hyperledger for System Admins
- Hyperledger Fabric for Developers
- Intro to Blockchain Cybersecurity
- Learn Solidity Programming by Examples
- Introduction to Ethereum Blockchain Development
- Learn Blockchain Dev with Corda R3
- Intro to Hyperledger Sawtooth for System Admins
Live Blockchain Courses
If you want to master Hyperledger Fabric, Ethereum or Corda, taking the following live classes is highly recommended:
- Live and self-paced blockchain development with Ethereum
- Live and self-paced blockchain development with Hyperledger Fabric
- Live and self-paced blockchain development with Corda
- Immersive Blockchain Bootcamp with live and self-paced courses
- Live crash course for learning Ethereum with Solidity
- Live crash course for building DApps with Hyperledger Fabric
- Live crash course for building DApps with Corda
- Live full-stack blockchain development in Hyperledger and Ethereum
Articles and Tutorials on Blockchain Technology
If you like to learn more about blockchain technology and how it works, reading the following articles is highly recommended:
- History and Evolution of Blockchain Technology from Bitcoin
- Overview of Blockchain evolution and phases from Ethereum to Hyperledger
- Comprehensive overview and analysis of blockchain use cases in many industries
- Blockchain Crowdfunding Security Token or Initial Coin Offerings
- A beginner Guide to Blockchain Technology
- How Decentralized Peer-To-Peer Network Works
- How blocks are added to the blockchain
- How Public and Private Keys of Cryptography Work
- What Is A Cryptographic Hash Function
- How Digital Signature Works In Blockchain
- The role and types of consensus mechanism in blockchain
- How Proof-of-Work Consensus Works in Blockchain
- How Proof of Stake Consensus works in Blockchain
Articles and Tutorials on Ethereum and Solidity
If you like to learn more about blockchain development in Ethereum with Solidity, reading the following articles and tutorials is highly recommended:
- Review of Architecture and Components of Ethereum
- Comprehensive Blockchain Ethereum Developer Guide from Beginner to Advance Level
- How to Write Ethereum Smart Contracts with Solidity in 1 hour
- Review of Architecture and Components of Ethereum
- How Ethereum Manages Accounts
- How Ethereum Manages Transactions
- How Smart Contracts Work in Ethereum
- How Ether and Gas Work in Ethereum
- How Ethereum Virtual Machine works
- How address and wallet work in Ethereum
- How mining works in Ethereum
- List of Tools and Technologies in Ethereum Ecosystem
- Review of challenges in distributed systems
- Review of Cap Theorem in Distributed Systems
- Horizontal Scaling versus Vertical Scaling in Distributed Systems
- How to Scale up Ethereum Blockchain Applications
- Review of scaling solutions for Ethereum
- How to Manage Ethereum State Channel with Raiden
- How Plasma Chains Work in Ethereum
- How Sharding and Gasper work in Ethereum
- How Proof-of-Stack Consensus Works in Ethereum
- A roadmap for Implementing Ethereum 2.0
- How to work with Decentralized Data and Content Storage in Ethereum
- How Decentralized Messaging with Whisper Works in Ethereum
- Review of Infura for Ethereum Development
- Review of Infura Ethereum API
- How to Use Remix with Infura for Ethereum Development
- How Ethereum Client API Works
- How Ethereum IPFS Storage Works
- How to Install and Start Ethereum IPFS Storage
- How to Run Ethereum IPFS Storage
- How to Work with Ethereum Swarm Storage
- How to Install Ethereum Swarm Storage
- How to Handle Ethereum Messages with Whisper
- Review of Popular Ethereum Smart Contract Libraries
- Review of Private and Permissioned blockchain
- How to Set up a Local Private Ethereum Blockchain
- How to Run Geth on a Local Private Ethereum Blockchain
- How to Build a Local Private Ethereum Blockchain with Mining
- How to Run Geth on a Local Private Ethereum Blockchain with Mining
- How to Create an Account on a Local Private Ethereum Blockchain
- How to Use Ethereum Optional Flags with New Chains
- Review of Ethereum Options for Development and Testing
- Review of Ethereum Developer Chain Options
- Review of Ethereum API and Console Options
- Review of Ethereum Networking Options
- Review of Ethereum Transaction Pool Options
Articles and Tutorials on Hyperledger Family
If you like to learn more about blockchain development with Hyperledger, reading the following articles and tutorials is highly recommended:
- Introduction to Hyperledger Architecture, Projects, Tools and Libraries
- Complete Review of Hyperledger Fabric Architecture and Components
- Hyperledger Fabric for System Administers versus Developers
- How to use Prometheus and Grafana to monitor Hyperledger Fabric
- Blockchain Developer Guide- How to Install Hyperledger Fabric on AWS
- Blockchain Developer Guide- How to Install and work with Hyperledger Sawtooth
- Blockchain Developer Guide- How to Install Hyperledger Burrow on AWS
- Blockchain Developer Guide- How to Install Hyperledger Iroha on AWS
- Blockchain Developer Guide- How to Install Hyperledger Indy and Indy CLI on AWS
- Blockchain Developer Guide- How to Install Hyperledger Seth and Docker on AWS
- Blockchain Developer Guide- How to Configure Hyperledger Sawtooth Validator and REST API on AWS
- Blockchain Developer Guide- How to Build Transaction Processor as a Service and Python Egg for Hyperledger Sawtooth
- Blockchain Developer Guide- How to Deploy Ethereum Smart Contracts with Hyperledger Burrow
- Blockchain Developer Guide- How to Create Cryptocurrency Using Hyperledger Iroha CLI
- Blockchain Developer Guide- How to Explore Hyperledger Indy Command Line Interface
- Blockchain Developer Guide- Comprehensive Blockchain Hyperledger Developer Guide from Beginner to Advance Level
- Introduction to Hyperledger Sawtooth Blockchain Development
Articles and Tutorials on R3 Corda
If you like to learn more about blockchain development on Corda , reading the following articles and tutorials is highly recommended:
Articles and Tutorials on Other Blockchain Platforms
If you like to learn more about blockchain development in other platforms, reading the following articles and tutorials is highly recommended: