An Overview of Blockchain Technology:

Architecture, Consensus, and Future Trends

Rahul Kumar Mohanty
(Department of Electronics and Commnuication Engineering, National Institute of Technology, Kurukshetra)

Abstract—Blockchain, the technology behind Bitcoin, has network of miners responsible for validating and processing
gained widespread popularity as an immutable digital ledger these contracts.
that enables secure transactions without the need for a central
authority. It finds applications in various domains, including While blockchain technology holds tremendous promise
finance, reputation systems, and the Internet of Things (IoT). for the future of Internet systems, it encounters several
However, challenges, such as the need for increased speed and technical challenges. To begin, scalability presents a
security, persist. This paper offers a simplified explanation of significant concern. Currently, the Bitcoin block size is
blockchain technology. It begins by describing the fundamental limited to 1 MB, and new blocks are mined approximately
workings of blockchain. It proceeds to compare various every ten minutes. As a result, the Bitcoin network is limited
methods for achieving consensus on transactions. Additionally, to processing around 7 transactions per second, which falls
it addresses the challenges facing blockchain technology and short of handling high-frequency trading. Expanding block
explores innovative solutions. Finally, the abstract outlines sizes could address this issue, but it comes with trade-offs
potential future directions for blockchain. This research such as increased storage space requirements and slower data
contributes to a better understanding of blockchain and its propagation across the network. This trade-off can lead to
future prospects. centralization, as fewer users are willing to maintain an
Index Terms—Blockchain, decentralization, consensus,
increasingly large blockchain. Balancing block size and
scalability, challenges, future prospects. security poses a complex challenge.
Secondly, a concern arises from the 'selfish mining'
I. INTRODUCTION strategy, which allows miners to potentially earn more than
Cryptocurrency has become a prominent term in both their fair share of rewards. Miners may withhold their mined
industry and academia. Among the most successful ones, blocks to maximize future revenue, causing frequent forks in
there is bitcoin which achieved remarkable success, reaching the blockchain. This behaviour hinders the overall
a capital market value of $10 billion in 2016. At its core, it development of blockchain technology, necessitating
relies on blockchain technology. Blockchain functions as a solutions to address this problem. Additionally, privacy
public ledger, recording all transactions in a chain of blocks. concerns have been raised regarding blockchain technology,
This ledger grows continuously as new blocks are added. It even when users conduct transactions with their public and
incorporates features like asymmetric cryptography and private keys.
distributed consensus algorithms to ensure user security and
ledger consistency. Key characteristics of blockchain include Moreover, current consensus algorithms, such as proof of
decentralization, persistence, anonymity, and auditability. work and proof of stake, face their own set of challenges. For
These attributes significantly reduce costs and enhance instance, proof of work is criticized for its excessive
efficiency. This technology has revolutionized the way we electricity consumption, while proof of stake may lead to a
conduct transactions and manage data, offering various concentration of power and resources among the wealthiest
benefits in terms of security and transparency. participants.

It eliminates the need for traditional banks and In anticipation of the future, blockchain researchers and
intermediaries, opening doors to a wide range of possibilities developers are actively exploring innovative solutions to
in financial services, including digital assets, remittances, and address the technology's challenges and shape its evolution.
online payments. Beyond the financial sector, blockchain One promising avenue of development involves the creation
finds applications in diverse fields such as smart contracts of new consensus mechanisms, such as proof of authority
which we will talk about later in this paper, public services, and delegated proof of stake. These novel approaches aim to
the Internet of Things (IoT), reputation systems, and security enhance the scalability, energy efficiency, and security of
services. blockchain networks. Their objective is to reduce the
environmental impact of blockchain technology while
These fields can benefit from blockchain in several ways. maintaining the integrity of the ledger. By diversifying
Firstly, blockchain provides immutability, meaning that once consensus methods, the blockchain community can enhance
a transaction is securely recorded on the blockchain, it the technology's adaptability to a wide range of applications.
becomes unchangeable. This feature is particularly attractive
to businesses that prioritize reliability and transparency, as it Furthermore, as blockchain technology continues to
helps trust in customers. Additionally, the distributed nature advance, there is a growing focus on achieving
of blockchain technology significantly reduces the risk of a interoperability between different blockchain networks. This
single point of failure. entails enabling seamless exchange of data and assets among
separate blockchains, which can lead to greater
For instance, in the context of smart contracts, once decentralization and open up new possibilities for
deployed on the blockchain, the contract can autonomously interconnected applications. This interconnected ecosystem
execute when predefined conditions are met, thanks to the holds the potential to unlock the full capabilities of
blockchain technology, extending its influence beyond the
realm of finance into areas such as supply chain The block body includes a transaction counter and actual
management, healthcare, and identity verification. By transactions. The number of transactions a block can hold
addressing these challenges and exploring new opportunities, depends on the block size and the size of each transaction.
blockchain is poised to play an increasingly pivotal role in Blockchain uses asymmetric cryptography for transaction
reshaping industries and digital ecosystems in the years to authentication, which is based on a digital signature.
come.
B. Digital Signature
II. BLOCKCHAIN ARCHITECTURE
A blockchain is like a chain of blocks that holds a In blockchain, each user has a private key and a public
complete list of transaction records, just like a traditional key. The private key is kept secret and is used to sign
public ledger. Each block has one parent block, and in some transactions. The digitally signed transactions are shared
cases, uncle blocks (children of the block's ancestors) are across the network. The digital signature process has two
stored in the blockchain. The very first block in a blockchain phases: signing and verification. For example, if Alice wants
is called the genesis block, and it doesn't have a parent block. to send a message to Bob, she signs her data with her private
We'll explain the details of how a blockchain works. key and sends the encrypted result and the original data to
Bob. In the verification phase, Bob uses Alice's public key to
check if the data has been tampered with. Blockchain
commonly employs the elliptic curve digital signature
algorithm (ECDSA) for this purpose.
C. Key Blockchain Characteristics
In summary, blockchain has the following important
characteristics:
 Decentralization. Unlike centralized systems that rely on
a trusted central authority (e.g., a central bank),
Fig. 1: An example of blockchain which consists of a blockchain operates without the need for a third party.
continuous sequence of blocks. Consensus algorithms maintain data consistency in a
distributed network, eliminating the need for central
servers.
 Persistency. Valid transactions are quickly confirmed,
and it's nearly impossible to delete or alter them once
they are recorded in the blockchain. Invalid transactions
can be detected immediately.
 Anonymity. Users can interact with the blockchain using
generated addresses, protecting their real identities.
However, it's important to note that perfect privacy
cannot be guaranteed due to inherent constraints.
 Auditability. The Bitcoin blockchain includes a system
that allows the auditing of transactions and user
balances, based on the Unspent Transaction Output
(UTXO) model. In this model, any transaction must
reference previous unspent transactions. When a
transaction is recorded in the blockchain, it changes the
status of previously unspent transactions to "spent,"
allowing for straightforward verification and tracking of
transactions.

Fig. 2: Structure of Block D. Taxonomy of blockchain systems

Presently, blockchain systems can be broadly categorized
into three primary types: public blockchain, private
A. Block Components blockchain, and consortium blockchain.
Each block consists of two main parts: the block header
and the block body. The block header includes:  Public Blockchain. This type allows all records to be
accessible to the public, enabling anyone to participate
(i) Block version: indicates which set of block validation in the consensus process.
rules to follow.  Consortium Blockchain. In this scenario, the consensus
(ii) Merkle tree root hash: the hash value of all the process involves a predefined group of nodes, typically
transactions in the block. representing various organizations. Consortium
(iii) Timestamp: current time as seconds in universal time blockchains are considered partially decentralized.
since January 1, 1970.  Private Blockchain. Private blockchains, in contrast,
(iv) nBits: target threshold of a valid block hash. limit participation to nodes associated with a specific
(v) Nonce: a 4-byte field, which usually starts with 0 organization. They are often regarded as centralized
and increases for every hash calculation. networks since a single entity fully controls them.
(vi) Parent block hash: a 256-bit hash value that points to TABLE I: Comparisons among public blockchain, consortium blockchain
the previous block. and private blockchain
 Property Public Consortium Private
blockchain blockchain blockchain The A. Approaches to consensus
Consensus All miners A selected One
determination set of nodes organization
PoW (Proof of work), the consensus mechanism
powering the Bitcoin network, addresses the need to select a
Read Public Could be Could be node for recording transactions in a decentralized network.
permission public or public or Random selection is the simplest approach, but it's vulnerable
restricted restricted to attacks. To publish a block of transactions, a node must
perform extensive computational work to demonstrate its
Immutability Nearly Could be Could be
impossible to tampered tampered commitment to network integrity. This work usually involves
tamper complex computer calculations, where each network node
Efficiency Low High High calculates a hash value of the block header. Miners
frequently change the nonce (a value) to obtain different hash
Centralized No Partial Yes
values. The consensus requires that the calculated value must
Consensus Permissionless Permissioned Permissioned be equal to or smaller than a specific given value. Once a
process node achieves this, it broadcasts the block to other nodes, and
comparison among the three types of blockchains is listed in they mutually confirm its accuracy. If the block is validated,
Table I. other miners add it to their own blockchains. Nodes
performing these hash calculations are called miners, and this
 Consensus Determination. In public blockchains, anyone PoW procedure is commonly referred to as "mining" in
can engage in the consensus process. Consortium Bitcoin. In a decentralized network, valid blocks can be
blockchains rely on a select group of nodes to validate generated simultaneously when multiple nodes find a suitable
blocks. Private blockchains grant full control to the nonce at nearly the same time. This can create competing
organization in determining the consensus. branches. However, it's unlikely that two competing forks
 Read Permissions. Public blockchains make all will generate the next block simultaneously. In PoW, the
transactions visible to the public. Consortium and private chain that becomes longer afterward is considered authentic.
blockchains may vary in terms of read permissions and Consider two forks created by simultaneously validated
aren't always open to the public. blocks U4 and B4. Miners continue to mine their blocks until
 Immutability. Public blockchains are highly resistant to a longer branch is found. B4 and B5 form a longer chain, so
tampering due to their extensive participant base. In miners on U4 switch to the longer branch. While PoW is
contrast, consortium and private blockchains are effective, it requires significant computational effort, which
susceptible to tampering as they involve fewer consumes substantial resources. To address this, some PoW
participants. protocols have been designed to incorporate side-applications
 Efficiency. Public blockchains tend to be slower due to to make the work more productive. For instance, Primecoin
their large number of nodes, resulting in limited looks for special prime number chains that can be used for
transaction throughput and increased latency. mathematical research.
Consortium and private blockchains, with fewer PoS (Proof of state) offers an energy-efficient alternative
validators, often offer more efficient performance. to PoW. Miners in PoS must prove ownership of a certain
 Centralization. Public blockchains are characterized by amount of currency, with the assumption that those who hold
decentralization. Consortium blockchains fall more currency are less likely to attack the network. However,
somewhere in between, featuring a partial level of using account balance alone for selection can lead to a
centralization. Private blockchains are considered fully concentration of power in the hands of the wealthiest
centralized as a single entity holds control. individuals. To mitigate this, various solutions have been
 Consensus Process. The consensus process of public proposed, combining stake size and other factors to
blockchains is open to global participation. Consortium determine the next block forger. For example, Blackcoin uses
and private blockchains follow a permission approach, randomization to predict the next generator based on a
allowing only designated participants. formula that considers both the lowest hash value and the
Public blockchains attract a diverse global user base and size of the stake. Peercoin employs coin age-based selection,
foster active communities. Consortium blockchains find where older and larger sets of coins have a higher probability
applications in various business contexts, with projects like of mining the next block. PoS, compared to PoW, is more
Hyperledger and tools from Ethereum being developed for energy-efficient and cost-effective. However, its lower
these purposes. mining cost can invite security risks. Many blockchains
initially adopt PoW and gradually transition to PoS. For
III. CONSENSUS ALGORITHMS instance, Ethereum is planning to move from Ethash (a form
In the world of blockchain, reaching an agreement among of PoW) to Casper (a form of PoS).
untrustworthy nodes is a modern-day challenge rooted in the PBFT (Practical Byzantine Fault Tolerance) is a
historical Byzantine Generals (BG) Problem. In the BG replication algorithm designed to tolerate Byzantine faults.
problem, a group of generals, each commanding a segment Hyperledger Fabric utilizes PBFT as its consensus algorithm,
of the Byzantine army, surrounds a city. Some generals favor as it can handle up to 1/3 of malicious Byzantine replicas. In
attacking, while others prefer to retreat. Success hinges on PBFT, a new block is determined in a round. In each round, a
achieving a consensus—deciding whether to attack or retreat primary node is selected based on certain rules and is
—because only a united front can succeed. responsible for ordering the transactions. The process can be
Similarly, blockchain faces a consensus challenge in a divided into three phases: pre-prepared, prepared, and
distributed environment, where there's no central authority committed. A node moves to the next phase if it receives
ensuring that all ledger copies on distributed nodes match. votes from more than 2/3 of all nodes in each phase. PBFT,
Various protocols are required to maintain ledger consistency therefore, requires that every node is known within the
among different nodes. Let's explore some common network. Stellar Consensus Protocol (SCP) is another
approaches to achieving consensus in blockchain. Byzantine agreement protocol that builds on PBFT. While
PBFT requires nodes to query each other, SCP provides  Quantum-Resistant Consensus. With the advent of
participants with the ability to choose which set of other quantum computing, blockchain projects started to
participants to trust. Building upon PBFT, Antshares has research and develop quantum-resistant consensus
implemented their dBFT (delegated Byzantine Fault algorithms. These algorithms are designed to withstand
Tolerance), in which professional nodes are elected to record potential attacks from quantum computers in the future.
transactions.
IV. CHALLENGES AND RECENT ADVANCES
TABLE II: Typical Consensus Algorithms Comparison
Property PoW PoS PBFT Here are some major challenges faced by Blockchain.
Node identity Open Open Permissioned A. Scalability
management
Blockchain networks face challenges related to
Energy saving No Partial Yes scalability. As the number of transactions increases, the
blockchain becomes larger and bulkier. Each node in the
Tolerated <25% <51% <33.3% faulty network must store all transactions to validate them, leading
Power of computing stake replicas
to increased storage requirements. Additionally, the original
adversary Power
restrictions on block size and block generation times have
Example Bitcoin Peercoin Hyperledger limited the transaction processing capacity of networks like
Fabric Bitcoin, which can only handle around 7 transactions per
second. This falls short of the real-time processing demands,
B. Comparison of consensus algorithms causing delays, especially for smaller transactions with lower
fees. Recent advances to address scalability challenges
Different consensus algorithms come with their own set include:
of advantages and disadvantages. Table II provides a
comparison of various consensus algorithms, and we've  Storage Optimization. Proposals aim to optimize
based this comparison on the properties listed. blockchain storage by removing old transaction records
 Node Identity Management. PBFT require knowing each and employing lightweight client solutions.
miner's identity for role selection. In PoW, PoS, DPOS,  Redesigning Blockchain. Protocols like Bitcoin-NG aim
and Ripple, nodes can join without predefined identities. to decouple conventional blocks into key blocks for
leader election and microblocks for transaction storage,
 Energy Efficiency. PoW consumes substantial energy addressing the trade-off between block size and network
due to continuous hashing. PoS and DPOS reduce work security.
by design, and PBFT, save energy as it doesn't involve
mining. B. Privacy Leakage
 Tolerated Adversary Power. PoW systems need to While blockchain provides a certain level of privacy
control 51% of hash power, while PBFT handle up to through the use of public and private keys, it has been shown
1/3 of faulty nodes. that transactions and user balances are publicly visible,
potentially compromising privacy. Various methods have
 Examples. Bitcoin uses PoW, Peercoin employs PoS,
been proposed to enhance privacy:
Hyperledger Fabric uses PBFT, and some other like
Bitshares opts for DPOS, Ripple implements its  Mixing. Mixing services shuffle funds from multiple
protocol, and Tendermint follows its own protocol. input addresses to multiple output addresses, making it
PBFT and Tendermint are for commercial use, PoW and harder to trace transactions. However, intermediaries
PoS are for public blockchains, and PBFT, Tendermint, could pose risks.
DPOS, or Ripple are for consortium/private blockchains.  Anonymity. Some blockchain projects, like Zerocoin and
C. Advances in Consensus Algorithms Zerocash, utilize zero-knowledge proofs to unlink
transaction origins from the transaction graph. This hides
Efforts to enhance consensus algorithms in blockchain payment destinations and amounts, enhancing privacy.
have led to the development of innovative solutions that
address specific challenges: C. Selfish Mining
 Consensus Algorithm Hybrids. Some blockchain projects Blockchain networks are susceptible to attacks by selfish
started to experiment with hybrid consensus models. miners who withhold mined blocks and reveal them
These models combine PoW and PoS to leverage the strategically. Selfish mining can lead to resource waste and
strengths of both. This approach aimed to enhance inequities within the network.
network security while maintaining efficiency.
Recent research and solutions related to selfish mining
 Sharding: Ethereum and other blockchain platforms include:
explored sharding as a way to improve scalability.
Sharding involves splitting the network into smaller  Stubborn Mining. This strategy amplifies gains by
parts, or "shards," each capable of processing combining mining attacks with network-level eclipse
transactions independently. This could significantly attacks.
boost transaction throughput.  Trail-Stubbornness. Miners continue mining even if their
 Layer 2 Solution. To address scalability issues, layer 2 private chain lags behind the public chain, resulting in
solutions like the Lightning Network for Bitcoin and the gains.
Raiden Network for Ethereum gained traction. These  Alternative Selfish Mining Strategies. Some research
off-chain solutions aim to process a large number of explored selfish mining strategies that can be profitable
transactions more quickly and cost-effectively. for smaller miners and identified security issues.
 Honest Miner Strategies. Approaches such as random D. Cross-Industry Adoption
beacons and timestamps help honest miners choose
Beyond its initial use in the financial sector, blockchain is
which blockchain branch to follow, reducing the
finding applications in various industries. Traditional sectors,
effectiveness of selfish mining.
such as healthcare, supply chain, and real estate, are
V. POSSIBLE FUTURE DIRECTIONS exploring ways to integrate blockchain for improved security
and transparency. Additionally, blockchain's smart contract
Here we will discuss possible future directions with capabilities enable automation and efficiency across
respect to four areas: Enhanced Testing, Centralization industries, like ridesharing and other service-based
Mitigation, Data-driven Insights, Cross-industry Adoption. applications, where smart contracts can govern interactions
A. Enhanced Testing between users and providers.
Blockchain ecosystems are evolving rapidly, with various VI. CONCLUSION
cryptocurrencies and blockchains emerging. Establishing
standardized testing criteria becomes critical to assess Blockchain stands as a transformative force in various
blockchain performance and reliability. This involves both a industries, driven by its decentralization, persistency,
standardization phase where industry-wide criteria are anonymity, and auditability. This overview has covered
established, and a testing phase to evaluate individual blockchain technology, its architecture, and key
blockchains against these criteria. This ensures that characteristics. We delved into consensus algorithms,
blockchain users and businesses can make informed choices providing insights through comparison. Additionally, we
based on comprehensive testing. highlighted challenges and solutions in the blockchain
landscape, setting the stage for promising future directions.
B. Centralization Mitigation With an expanding array of blockchain applications, our
ongoing exploration aims to offer deeper insights into this
While blockchain technology is designed for
innovative technology
decentralization, there is a concerning trend of mining
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