Blockchain technology is one of the most talked about and rapidly growing areas of technology today. It is built on a number of key elements, each of which plays a crucial role in the functioning of the system. In this blog post, we will demystify and break down some of the key ingredients of blockchain technology and explain the inner workings of this revolutionary new wave.
2. What Makes up a Pair of Blockchain Keys?
In the context of blockchain technology
, a pair of keys is made up of a private key and a corresponding public key, which are created together and mathematically connected.
A private key, also known as a secret key and account key, is a long string of letters and numbers that is used to sign transactions and verify authenticity. Think of it like a secret password that you use to access your bank account or email, it allows you to transfer, buy, or sell your assets. A private key is a secret code that is unique to you, and just like you wouldn’t share your bank account password with anyone, you should never share your private key with anyone. A corresponding public key is generated automatically when a new private key is created.
A public key is derived from the private key through a mathematical process. The public key is not secret and is used to verify the identity of the owner of a digital asset and prove ownership, which necessitates a larger amount of data and calculation than a private key. This is reflected in the longer length of the public key, which is generally 128 characters or more. A public key also generates a unique address, commonly referred to as a wallet address, which is used to receive and send digital assets on the blockchain network.
3. Understanding Wallets: Storing and Managing Digital Assets
A wallet is a digital storage space where you keep your digital assets on the blockchain, such as NFTs
and native tokens
. It can be thought of as similar to a physical wallet where you keep your cash and cards.
A wallet is made up of a private key and a public key, and a wallet address is a unique string of letters and numbers that is generated from the public key. It is like a bank account number, but it is specific to the blockchain network where the assets are held, and is used to receive and send digital assets.
For example, let’s say you have a wallet for Hedera Hashgraph
. The private key is like a password that you use to access and manage your HBAR, which is the native coin of Hedera. The public key is like an account number, it is used to verify your identity and prove that you own the HBAR and to generate a unique address, commonly referred to as a wallet address, which is used to receive and send HBAR on the Hedera Hashgraph blockchain network.
A transaction history in a wallet is a record of all transactions that have been made using that specific wallet. It includes information such as the date and time of the transaction, the amount of digital assets that were sent or received, and the wallet address of the sender and receiver. It also includes a unique transaction ID that is generated by the blockchain network and can be used to track the status of a transaction on a block explorer.
4. Consensus Timestamps in Blockchain
A consensus timestamp is the time at which a block of transactions is added to the blockchain and is agreed upon by the majority of the nodes in the network. It is used to establish the order of blocks in the blockchain and is an important part of the consensus mechanism used by the blockchain.
Some blockchains use a process called “mining” (see appendix 2) to add new transactions to the blockchain. Each block (see appendix 1) of transactions added to the blockchain have a consensus timestamp added to the block by the miner who mined the block (based on the time on their computers), to record the time the block is added to the blockchain, which then becomes a permanent part of the blockchain. Since the consensus timestamp is added to the transaction at the time of mining, any attempts to change the timestamp would alter the final calculated transaction hash as well, which would be easily detected by the network.
The consensus timestamp serves as a way to order the transactions within the blockchain, it helps to prevent double-spending and to ensure that all transactions are processed in the correct order. It also serves as a way to track the age of a transaction and to know how long it took for a transaction to be processed by the blockchain network.
Appendix 1: In the context of blockchain technology, a block refers to a collection of transactions that are grouped together and added to the blockchain. Each block contains a certain number of transactions, and once those transactions are added to the block, they become a permanent part of the blockchain. Each block also contains a reference to the previous block, forming a chain of blocks that make up the blockchain.
Appendix 2: When a miner “mines” a block, they are essentially adding a group of transactions to the blockchain. Each block can contain multiple transactions and a miner can include multiple transactions in a single block that they mine. Once a block is mined, it is added and broadcasted to the blockchain and the transactions it contains are considered confirmed and can no longer be altered or deleted. Miners are incentivized to add new blocks to the blockchain by receiving a reward in the form of the blockchain’s native coin for each block they mine.
5. What is a Gas Fee?
A gas fee is a small amount of cryptocurrency that is required to pay for the computational power needed to execute a transaction on the blockchain. Gas fees are required to incentivize the miners to process and include a user’s transaction in a block.
Think of gas fees as the cost to use the blockchain network. Just like how you need to pay for electricity to power your computer, you need to pay a small fee to use the blockchain network. This fee is used to pay the miners or validators who are responsible for verifying and processing your transaction.
The more complex the transaction, the more computational power it requires, and the higher the gas fee. For example, if you are sending a simple payment, the gas fee will be lower. But if you are executing a smart contract, which requires more computational power and generally has a larger transaction size, the gas fee will be higher. Aside from that, gas fees can fluctuate depending on the demand for the network at a given time. When more people are using the network, the gas fee may be higher as there are more transactions competing for the same block space.
6. Understanding PoW and PoS
- It is a process where miners use their computational power to solve complex mathematical problems in order to validate transactions and create/add new blocks on the blockchain.
- Anyone can participate in mining and the chances of winning a block reward are based on computational power and electricity consumption.
- Miners are rewarded with coins for their efforts.
- Bitcoin is one of the most well-known examples of a blockchain that uses PoW.
- The process of solving these mathematical problems requires a lot of computational power and energy, which can be costly and not environmentally friendly.
- It is a process where users are chosen to validate transactions and create/add new blocks on the blockchain based on the amount of coins they hold and “stake” (or lock up) in the network.
- The more coins a user holds in their wallet and locks up through staking, the higher their chances of being selected as a validator by the blockchain network.
- The selection process is based on a combination of the user’s staked token amount and a random element.
- Users are rewarded with coins for helping to secure the network.
- Cardano is one of the blockchain platforms that uses a PoS consensus algorithm.
- This process is seen as more energy efficient compared to PoW as it does not require as much computational power to calculate hashes.
For example, let’s say there is a blockchain network that uses PoW and has 10 miners. Each miner competes with each other to solve a mathematical problem, and the first one to solve it gets to validate the transactions and create a new block, and also gets rewarded with new coins.
On the other hand, in a blockchain network that uses PoS, the role of miners is replaced by validators where instead of solving mathematical problems, it validates transactions based on the amount of coins held by the users. Users who hold more coins and stake them, have a higher chance of being chosen as validators and get rewarded.
7. Mining, Staking, and Minting
Mining, staking and minting are three different ways that new digital assets can be created and distributed on a blockchain network.
Mining is a process that is used to create new coins on a blockchain network that uses proof-of-work (PoW) consensus algorithm. Miners use their computational power (hashrate) to solve complex mathematical problems which are known as hashes, in order to validate transactions and add new blocks to the blockchain. The process of solving these mathematical problems is called “mining” and miners receive coins as a reward for their work. Bitcoin, for example, is created through mining using PoW mechanism. Very often, the mining process consumes a lot of energy, and it is not environmentally friendly.
Staking, typically performed by the user of a wallet, is a process that uses a proof-of-stake (PoS) consensus algorithm to create new coins. These users hold a certain amount of existing coins in their wallet and stakes them by not using them for transactions and keeping them locked. This helps to secure the blockchain network and in return, the user is rewarded with new coins. This process is called “staking” because it is similar to putting money in a savings account, where you earn interest on the amount you deposit.
Minting is the process of creating new digital assets such as native tokens and NFTs on a blockchain network. These new assets can then be distributed to users, sold on a cryptocurrency exchange or used in other ways within the blockchain ecosystem. In the case of NFTs, the process typically involves creating digital assets such as images, videos or audio files, and then minting them as unique, one-of-a-kind assets on a blockchain network. For example, if a music band wants to create an NFT that represents ownership of a limited edition album, they can mint it on the Cardano blockchain and sell the NFT with a unique token ID to fans or other interested parties. This NFT cannot be replicated, divided or exchanged for an equal value.
8. Transforming Blockchain Adoption with No-Code/Low-Code
With blockchain technologies like Cardano
integrated with no-code/low-code platforms like Joget DX
, not only can you perform blockchain transactions, but you can also easily design and implement an end-to-end user experience all the way from digital forms, customizable table lists with multiple form factor views, process designs and tailored user interfaces.
Joget recently released the Cardano Blockchain Pack
and Hedera Ledger Pack
on the JogetOSS
to empower non-technical business users to build applications that interact with the Cardano blockchain and Hedera Hashgraph. Ultimately, these plugins abstract away the technical complexity of executing transactions, minting, and burning tokens on the blockchain network with its visual interface, making it more versatile and adaptable to a wide range of use cases.
Considering some users might want to store and access their digital assets such as documents on a decentralized network to be used in conjunction with blockchain technology, the IPFS File Upload Plugin
is also made available in the JogetOSS
repository to ease the handling of file uploads and pinning with IPFS that comes with the following capabilities:
- When a new file is uploaded, the file is also uploaded to IPFS and pinned on the IPFS node.
- When a file replaces an existing file, if the file content differs, the old file is unpinned and the new file is uploaded to IPFS and pinned on the IPFS node.
- When a file is removed or its related form record is deleted, the file is unpinned from the IPFS node.
9. Get Started
As a Joget app designer, you will only need to understand the concepts of a particular blockchain technology to start building full-fledged enterprise apps with your preferred blockchain pack as composable/modular blockchain components, all without writing any code.
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