Blockchain networks have components, dependent on each other and work together to ensure safety, transparency and efficient data transactions within a business network.

The data is chronologically arranged and cannot be deleted or modified without any consensus from other networks. Therefore, blockchain technology has now become trustworthy for tracking orders, payments, accounts and other transactions.

Blockchain-as-a-service (BaaS) is emerging as a third-party service for creating, maintaining and operating a cloud-based network for other companies.

In short, it is a web host that runs the back-end operations for a blockchain-based platform. BaaS is being adopted innovatively by various industries.

Key players in the blockchain-as-a-service market include Microsoft, IBM, Amazon Web Services, SAP, Oracle, and others. This article focuses on major components of blockchain that are driving these industries efficiently.

What is Blockchain?

Blockchain is a database that is distributed across a computer network called nodes. No change can be made once the data is added to the blockchain.

Tampering with data is difficult due to the consensus mechanism, which does not allow unauthorised sources to make changes to it because all the computers should agree upon it.

As the data in the block can’t be changed, it is highly reliable for doing audits, vote counting, etc. 

Blockchain-as-a-Service (BaaS)

The companies are in a race to adapt to the emerging technological innovations. But they don’t have the required time to build the technology from scratch. T

hese third-party vendors develop, host and operate blockchain applications for the company, without any hefty capital investment needed.

BaaS can act as a driver in the adoption of blockchain technology. There is a demand for blockchain hosting services. 

Key Components of Blockchain-as-a-Service:

Understanding the components of blockchain is necessary for its effective implementation. These components form the backbone of the blockchain-as-a-service market. 

1. Nodes

A blockchain node refers to a physical device (typically a computer) which is a part of the blockchain network that runs a protocol software (Ethereum, Bitcoin, Hyperledger Fabric, etc.) and connects to its network. Nodes are the building blocks of blockchain. It maintains, protects and updates the blockchain ledger. Different nodes with unique functions exist today. Some of them are:

• Full Nodes

Full nodes store the entire ledger history, sync, store, copy and distribute data along with validating new blocks. They do not depend on other nodes to verify transactions. They help to create a trustworthy database. There are two types of full nodes: pruned and archival.

• Light Nodes

Light nodes store block headers and do not have the entire blockchain data. It only has the hash value of the transaction; the whole transaction is accessed through the hash value only. Thus, it depends on full nodes to function. They are used for fast and simple processing of daily activities and transactions.

• Mining Nodes

Before adding the block to the blockchain, mining nodes perform the verification process and then add it to the structure. This process of validating and adding is called mining. 

2. Ledger

A ledger is a detailed accounting record of a company. It maintains a chronological history of all the transactions. Simply put, a ledger is a file documenting user data and transactions. A ledger has a block with a set of transactions, a timestamp and a hash value, which makes the data immutable.

A distributed ledger is a ledger that is spread across all the nodes in the network, leading to data decentralisation. If anyone tries to change the data in one node, other nodes prevent it from happening by comparing block hashes. There is no exclusivity to any node. This helps to prevent unauthorised tampering of data. 

3. Consensus Algorithms

Consensus mechanism helps the nodes to come to an agreement. While data decentralisation is important, these algorithms check the transactions and help to achieve agreement among these distributed systems. The different types of consensus algorithms used in blockchain are:

1. Proof of Work (PoW): It is the most common consensus method in which a participant node (miner) needs to solve a complex puzzle. This is called mining. Once solved, the miner submits the proof (a valid solution) to the entire network. All the other nodes of the network verify it, and if the solution is correct, that block of transaction is added to the blockchain. It is an energy-intensive and time-consuming mechanism. It is the most reliable consensus algorithm.

2. Proof of Stake (PoS): Compared to the proof of work consensus method, this method has emerged as a low-energy-consuming and low-cost alternative. It uses an incentive mechanism to come to a consensus. Participants lock up a stake (a certain amount of cryptocurrency) in the network. The next block of transactions is proposed by a validator. Other participants verify it, and if valid, it is accepted into the blockchain network. The validators get the rewards proportionate to their bets.

4. Cryptography

Blockchain’s security largely depends on cryptography to make it tamper-resistant. Some of the key cryptographic security features of blockchain are:

1. Hashing: It gives a fixed-size output (hash value) to an input of any size with the help of the hash value of the previous block. This creates an immutable link between the blocks.

2. Public and Private Keys: A unique pair of keys is assigned to a user for performing a secure transaction. This is another essential aspect of cryptography. A public key is widely distributed, and a private key is kept secret by the owner. 

Conclusion

Integrating blockchain into a business for enhanced transparency, efficiency and security with the help of a third-party service provider benefits the businesses.

The most attractive advantage of BaaS is its easy implementation into the company’s system. It is easy to use and customisable according to the business needs.

As the company's needs evolve and the size grows, demand for blockchain infrastructure will also increase.

BaaS also reduces the company’s capital investment that would be required to develop a blockchain solution from scratch.

According to Pristine Market Insights, an increase in the ease of accessibility to all businesses is boosting its adoption in the market.

Disclaimer: This article was written to provide guidance and understanding. It is not an exhaustive article and should not be taken as financial advice. Obiex will not be held liable for your investment decisions.