Below are the main components of blockchain architecture.
Distributed Ledger
A distributed ledger is a shared database in a blockchain network that stores copies of transactions (for example, in the form of a file that can be edited by all participants) . In most shared text editors, any user with editing rights can delete the entire file. However, distributed ledger technologies have strict rules about who can edit the file and how. For example, entries cannot be deleted after they have been recorded.
Smart contracts
Companies use smart contracts to manage commercial transactions independently without involving a third party. Smart contracts are programs in a blockchain system that automatically run when certain conditions are met. Transactions are recorded in the ledger if they meet the “if…then” verification conditions. For example, a logistics company may have a smart contract in place whereby payment is made automatically upon arrival of goods at the port.
Public key cryptography
Public key cryptography is a security system that allows participants in a blockchain network to be uniquely identified. The system generates two different keys for each network user. One key is public and shared by all network participants. The second is a unique private key. The combination of private and public keys unlocks the data in the ledger.
For example, John and Jill are network users. John records a transaction encrypted with his private key. Jill can decrypt it using her public key. This way, Jill can verify that John made the transaction. If John had used an invalid private key, Jill would not have been able to use her public key.
