20 Apr 2025

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Key Concepts

• Distributed Ledger
  • A copy of the data (the “ledger”) is stored across many nodes (computers).
  • No central authority — everyone shares the same source of truth
• Decentralization
  • No single party controls the network
  • Decisions, validation, and storage are spread across many participants
• Block
  • A block = a container of data.
  • Transactions, Timestamp, Previous block’s hash, Nonce (if using Proof of Work)
• Chain
  • Blocks are linked together using cryptographic hashes
  • Each block points to the previous one — making it tamper-evident
• Hashing
  • A hash is a fixed-length fingerprint of data
• Consensus Mechanism
  • A method for all nodes to agree on the state of the blockchain.
  • Proof of Work (PoW) – Bitcoin, energy intensive, Proof of Stake (PoS) – Ethereum 2.0, eco-friendly, Others: DPoS, PoA, PBFT
• Immutability
  • Once data is added to the blockchain, it's almost impossible to change. This protects against fraud and revisionism
• Transparency
  • Most blockchains are public — anyone can verify any transaction
  • Great for trustless systems and audits
• Smart Contracts
  • Self-executing code stored on the blockchain
  • Runs when certain conditions are met (e.g., on Ethereum)

Distributed Ledger

A Distributed Ledger is a database that is shared and synchronized across multiple computers (called nodes) in different locations. Blockchain is a type of distributed ledger. Every node in the blockchain network has a full copy of the ledgerNew entries are added only when most nodes agree (consensus).

For example , As 2025, the Bitcoin network comprises approximately 21,698 publicly reachable nodes. In addition to these, there are an estimated 62,391 total nodes on the Bitcoin network. This figure includes both publicly reachable nodes and those that are not directly accessible, such as nodes operating behind firewalls or using privacy networks like Tor

Bitcoin nodes communicate with each other using the Bitcoin P2P (peer-to-peer) protocol, which is a custom application-layer protocol designed specifically for the Bitcoin network

Joining a distributed network like a blockchain (e.g., Bitcoin, Ethereum) is actually quite straightforward — but it depends on your role: do you want to be a full node, light client, or just interact via a wallet or app?

Steps

• Choose the Network - Bitcoin, Ethereum, ...
• Install Node Software - Bitcoin Core, Nethermind, Solana Validator ..
• Connect to Peers - The node automatically connects to peer nodes using built-in discovery protocols
• Download the Ledger (if full node)
  • Full nodes download the entire blockchain from peers
  • This can take hours or days depending on network (e.g., Bitcoin ~500GB+)
• Start Participating
  • Validate transactions & blocks (if a validator or miner)
  • Relay data to others (as a full node)
  • Interact with dApps and smart contracts
  • Submit your own transactions

Type of nodes

• Full Node
  • Stores the entire blockchain, validates transactions & blocks independently
  • Examples: Bitcoin Core, Geth (Ethereum)
  • Pros: High trust, no need to rely on others
  • Cons: Requires a lot of storage & bandwidth
• Light Node / SPV Node
  • Downloads only block headers, not full blocks
  • Verifies transactions by asking full nodes for proof
  • Common in mobile wallets
  • Pros: Lightweight, fast
  • Cons: Must trust full nodes for data
• Mining Node / Validator Node
  • Special full nodes that produce new blocks
  • Bitcoin: Mining nodes solve PoW puzzles, Ethereum 2.0 & others: Validators stake coins to propose/validate blocks (PoS)
  • Pros: Can earn rewards
  • Cons: Needs powerful hardware or stake
• Archive Node
  • mainly in Ethereum
  • Stores entire blockchain + historical states
  • Keeps every version of every smart contract & account
  • Used for debugging, explorers, analytics
  • Pros: Deep data access
  • Cons: Huge storage requirements (TBs)
• Masternode
  • Special node with extra roles (e.g., private txs, instant sends)
  • Requires collateral to run (e.g., 1000 DASH)
  • Pros: Passive income, governance rights
  • Cons: Locked capital, centralized concerns
• Hidden Nodes / Tor Nodes
  • Operate anonymously (e.g., over Tor)
  • Not publicly listed but still participate in the network

Mining

• Mining is how new entries (blocks) are securely added to that ledger
• Blockchain = the history
• Mining = the process that secures and extends that history
• Mining is the process of validating transactions, grouping them into a block, and adding that block to the blockchain — in a secure, tamper-proof way
• Mining is required in Bitcoin and PoW (Proof of Work) chains
• In Bitcoin, mining is essential — it secures the network and creates new BTC
• PoS (Proof of Stake) chains and L2s -PoS chains and L2s: staking, validating, or other mechanisms replace mining
• Mining is only involved in non-Bitcoin use cases if the underlying blockchain uses Proof of Work. Most modern blockchains use staking, not mining, for things like DeFi, NFTs, and smart contracts

Proof of Work (PoW) vs. Proof of Stake (PoS)

• Proof of Work (PoW)
  • Proof of Work (PoW) — "The Work Race" - Imagine 100 people are trying to unlock a treasure chest (a block), They all have to solve a really hard puzzle — first one to solve it gets the reward. It's fair, but very tiring and wastes a lot of energy.
  • PoW = “Prove you worked hard” (by burning energy). Proof of Work forces miners to spend real-world resources (electricity + computation) to prove they put effort into creating a block. You can't just fake a block without paying real costs (electricity, hardware).
  • PoW is like locking a vault with a complex, heavy door. The door doesn't create money, but it protects the money inside from thieves
  • Miners compete to solve math puzzles. The first miner to solve the hash puzzle adds a block and gets rewarded
  • Need Specialized mining rigs (ASICs, GPUs)
  • Bitcoin, Dogecoin, Monero
  • Requires 51% hash power
  • In Proof of Work (PoW), sometimes two (or more) miners solve the puzzle at almost exactly the same moment. When that happens both miners broadcast their block to the network. Different parts of the network hear about different blocks first (because of internet delays).For a short time, the blockchain splits into two competing versions (this is called a temporary fork). Miners keep mining the next block. Whichever chain becomes longer first (i.e., gets the next block added) wins. The shorter chain gets abandoned (those blocks are orphaned or uncled). Transactions from the "lost" block are usually put back into the pool to be included later. In the end, only one chain survives — the longest chain
• Proof of Stake (PoS)
  • Proof of Stake (PoS) — "The Trust Lottery". Now imagine instead of racing, people put some of their money (stake) into a pot. The system randomly picks one of them to unlock the treasure — based on how much they’ve staked. No need for racing or huge energy use. If they cheat, they lose their staked money.
  • PoS = “Prove you care” (by risking your money)
  • No mining needed — validators are picked based on how much crypto they’ve staked
  • Just a computer is sufficient
  • Ethereum 2.0, Cardano, Solana, Polkadot
  • How Ethereum PoS Works
    • Ethereum used Proof of Work earlier, but now Ethereum uses Proof of Stake. No more mining. No more massive energy waste
    • Validators Instead of Miners - Anyone can become a validator by staking 32 ETH
    • Random Selection - Ethereum randomly picks one validator to propose the next block. Think of it like a lottery, but your chances depend on how much ETH you staked
    • Block Proposal - The chosen validator creates a new block and proposes it to the network
    • Block Attestation - A committee of other validators (randomly selected) vote on whether the block looks good
    • Rewards and Penalties - If you behave correctly → you earn ETH rewards. If you cheat (try to create invalid blocks) → your stake gets slashed (some ETH is burned or taken)

How to Choose Between PoS vs PoW

• Simple payment system (like Bitcoin) - PoW works well
• Smart contracts, DeFi, NFTs PoS is usually better
• PoW = great for pure money/asset transfer
• PoS = flexible for applications and sustainability
• PoW burns a ton of energy, PoS uses barely any energy
• In PoW, big mining farms can dominate, In PoS, rich stakers can accumulate influence

Blockchain

Blockchain is a special kind of database that stores data in a series of linked blocks, and it's designed to be secure, transparent, and tamper-proof. Each block is like a page in a ledger — and they’re chained together in order, forming a growing history that’s nearly impossible to change.

Working simplified:

• A transaction happens- Alice sends 2 coins to Bob
• It gets broadcasted to a network - A bunch of computers (called nodes) hear about it
• The network validates the transaction - Usually through consensus algorithms (like Proof of Work or Proof of Stake)
• Valid transactions are grouped into a block
• The block is added to the chain, referencing the previous block's hash (a fingerprint)
• Now the blockchain has a new entry, and it’s immutable (can’t be changed without breaking the whole chain)

Important notes:

• Each block contains a hash of the previous block
• Tampering with one block would break the chain
• The ledger is replicated across many nodes, so it’s decentralized and resilient
• Modern blockchains also use cryptographic signatures

Working:

• New transactions are broadcast to the network
• Miners gather them into a block
• They race to solve a puzzle - Find a nonce that makes the block’s hash meet a target (e.g., starts with many zeroes).
• First miner to solve it broadcasts the block
• Other nodes verify the block and add it to the chain
• That miner earns A block reward (e.g., Bitcoin), Transaction fees

The time it takes to mine a block depends on the blockchain protocol — it’s actually deliberately controlled to maintain network stability and security. Mining time is not random — it’s intentionally controlled by the blockchain protocol.

• Bitcoin ~10 minutes. Bitcoin’s 10-minute block time was chosen by Satoshi to: Allow decentralized miners to compete fairly, Create a predictable supply of BTC (every ~4 years → halving)
• Dogecoin ~2.5 minutes
• Solana - ~0.4 seconds

Too fast = More forks, more bandwidth usage, harder to reach consensus. Too slow = delays in transaction confirmation

Blockchain validation

Blockchain validation = the process where nodes check that everything happening on the blockchain is correct and follows the rules

• Transactions
  • Are the digital signatures valid?
  • Does the sender actually own the coins they are trying to spend?
  • Are they trying to double-spend the same money?
  • Each transaction is checked individually

• Blocks
  • Does the block meet all format rules?
  • Is the block size under the allowed limit?
  • Is the PoW or PoS requirement satisfied?
  • Does it reference the correct previous block (chain continuity)?
  • The entire block (set of transactions) is checked

Working example

• Someone sends a transaction (e.g., "Alice pays Bob 5 BTC").
• Nodes validate that Alice's digital signature is legit
• Nodes check if Alice really has 5 BTC to spend
• Miners/validators bundle transactions into a new block
• They validate the block — and solve the PoW or PoS
• Other nodes double-check the block before accepting it into their copy of the blockchain
• Only after everyone agrees, the transaction is officially recorded forever

Every full node in the network independently verifies the block for itself. There is no fixed number of nodes that "vote" to accept a block

• When a miner/validator creates a new block, they broadcast it to the network
• Each full node that receives it: Validates the block (checks all rules: transactions, block size, hash, etc.), Accepts it into its own blockchain if everything checks out, Rejects it if it finds anything wrong.
• No majority vote, No asking permission, Each node decides on its own
• If most nodes independently validate and accept the block → it becomes part of the "main chain"
• If a block is invalid → nodes will reject it → that block dies (ignored)
• So consensus = all nodes individually agreeing by following the same rules, not by voting

Minimum Number of Nodes in a Blockchain

A blockchain can function with just 1 node. but it would not be decentralized or trustworthy. One node = one copy of the ledger, but no one else to verify or validate it. Decentralization (which gives blockchain its power) needs multiple independent nodes. The more nodes, the more secure and fault-tolerant the network is.

• Minimum nodes = 1 (bare minimum)
• Real blockchain = needs 3+ (to avoid centralization)
• Bitcoin: ~15,000 public full nodes
• Ethereum: ~10,000+ nodes after PoS merge

A fake node is a node that pretends to be legitimate but tries to mess with the network. If someone adds many fake or malicious nodes to a blockchain network, it’s called a Sybil attack. Fake nodes can control decisions (like validating bad transactions). Different blockchains are designed to resist this by using resource-based protections:

• Proof of Work (PoW) - Need tons of real computing power + electricity - hard to fake
• Proof of Stake (PoS) - Need to own a lot of real cryptocurrency - very expensive to fake
• Permissioned Blockchains - Nodes must be pre-approved -can't just add fake

Bitcoin

Bitcoin ≠ Blockchain. Bitcoin is a cryptocurrency, Blockchain is the technology that powers Bitcoin (and many other things too like NFTs, Medical records, Voting systems, Smart contracts like Ethereum).

Smart Contracts

A smart contract is basically a self-executing program stored on a blockchain. It runs exactly as programmed — automatically, transparently, and without needing a middleman. Smart contract is written in code (like Solidity on Ethereum). It’s deployed to the blockchain, Once on-chain, it can’t be changed

It runs automatically when triggered — no trust or manual input needed

Top Use Cases

• Decentralized Finance (DeFi) - Cut out banks and automate financial services
• NFTs (Non-Fungible Tokens) - Create and manage digital ownership
• DAOs (Decentralized Autonomous Organizations) - Organizations governed by smart contracts
• Supply Chain & Logistics - Track and automate item flows
• Real Estate & Tokenized Assets - Buy/sell assets without brokers
• Identity & Credentials - Control your digital ID securely
• Insurance - Claims processing without paperwork
• Gaming - Own and trade in-game assets
• Escrow Services - Trustless payment holding
• Crowdfunding - Transparent fundraising

Creating a smart contract is like building a tiny app that runs on a blockchain — it follows a clear series of steps

• Choose a Blockchain Platform
• Write the Smart Contract Code - Use a language like Solidity
• Set Up Development Environment
• Compile the Contract - Translates Solidity into bytecode (what the EVM understands)
• Test the Contract
• Deploy to a Blockchain
• Interact with the Contract

Wallet

A wallet is a tool (app, device, or software) that stores your private keys and allows you to interact with the blockchain — like sending, receiving, and managing cryptocurrencies or NFTs

Wallet Stores

• Private Key: Secret — used to sign transactions
• Public Key: Derived from your private key
• Blockchain Address: Short version of your public key — where people send crypto to you

Your crypto or NFTs are on the blockchain. The wallet just holds keys to access and control them

Wallet can:

• Send/receive cryptocurrencies (like BTC, ETH)
• Store NFTs
• Sign smart contract transactions
• Manage multiple blockchain accounts
• Connect to dApps (decentralized apps)

If you lose access to your wallet — and you don't have a backup — you lose your crypto permanently. Because you are the only one who holds the private key

NFT

An NFT (Non-Fungible Token) is a unique digital asset that represents ownership of something — like art, music, video, or even a tweet. Unlike cryptocurrencies (like Bitcoin or ETH), which are fungible (1 BTC = 1 BTC), NFTs are one-of-a-kind

The NFT itself — meaning the ownership certificate — is stored on the blockchain. But the actual digital file (like the image, video, music, etc.) is usually stored somewhere else because large files are too big and expensive for blockchain