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What are the basic components of Blockchain Ecosystem?

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Node application is a specific software solution that each inter-connected computer needs to participate in a blockchain activity or to connect with blockchain ecosystem. Example: For Bitcoin ecosystem, each computer uses Bitcoin wallet application to participate in Bitcoin ecosystem and to identify each node on the network. 

Shared Ledger is a distributed data structure that Blockchain’s node application stores to hold the content of Blockchain ensuring access for every node. Consensus Algorithm is a logical component of Blockckhain Ecosystem that is implemented as part of node application. It provides rules for validation of transactions ensuring data security and permanence of Blockchain. There are three different types of Consensus Algorithm as given below:

  • Proof of Work (PoW)
  • Proof of Stake (PoS)
  • Delegated Proof of Stake (DPoS)

Example: Bitcoin uses Proof-of-Work (PoW) consensus algorithm. Virtual Machine is a part of node application that provides an environment to run all the instructions. It handles all the activities done in Blockchain.

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