Avalanche®, just like many other blockchain networks, relies on a structure composed of blocks. Each block contains a collection of individual transactions. These transactions can encompass various activities, from cryptocurrency transfers to executing smart contracts and recording any data relevant to the blockchain's purpose(s).
To better understand the importance and detailed components of transaction blocks, there’s two differences we can compare and contrast from each other, PoS (Proof-of-Stake) and PoW (Proof-of-Work):
Proof-of-Stake:
In a Proof of Stake (PoS) blockchain, a "transaction block" is a component of the blockchain's structure that contains a collection of transactions, to put it simply. These transaction blocks are created by validators, also known as stakers, who are selected to propose and validate blocks based on their stake. The dependencies could be from the amount of cryptocurrency they hold and have locked up as collateral and sometimes other factors like their reputation (reliability) or a randomized selection process.
1. Transactions: The primary purpose of a transaction block is to store a batch of validated transactions. These transactions can involve the transfer of cryptocurrency tokens (P-Chain & X-Chain), executing smart contracts (C-Chain), or any other activity allowed on the blockchain with PoS.
2. Header: Each transaction block has a header that contains essential information about the block itself. This header usually includes the following:
Block number or height: The position of the block in the blockchain's linear sequence of blocks.
Timestamp: The time at which the block was created or proposed.
Previous block's hash: A reference to the hash of the previous block in the blockchain, creating a chronological link between blocks.
Merkle root: A cryptographic hash of all the transactions within the block. This Merkle root ensures the integrity of the transactions in the block.
3. Validator's Signature: In PoS, the validator who creates the block includes a digital signature to prove their authority. This signature is generated using the validator's private key and can be verified by anyone using the validator's public key. It demonstrates that the block was indeed created by a legitimate and authorized validator if applicable.
4. Staking Information: Depending on the specific PoS protocol, such as Avalanche, the block may also include information about the validator's stake, such as the amount of cryptocurrency they have locked up as collateral. This information is essential for determining the validator's eligibility to create blocks and their potential rewards or penalties.
5. Consensus Mechanism: PoS blockchains rely on a consensus mechanism to select validators and agree on the state of the blockchain. The consensus mechanism ensures that only valid transactions are included in blocks and that the chain remains secure.
NOTE: To learn more about Avalanche’s consensus mechanism, the Snowman protocol, review this article.
6. Incentives and Rewards: Validators are typically rewarded for creating and validating blocks. These rewards may come in the form of transaction fees, newly minted tokens, or a combination of both. In some PoS blockchains, validators may also face penalties for malicious behavior or failing to validate transactions correctly.
7. Finality: PoS blockchains often achieve faster finality compared to Proof of Work (PoW) blockchains. Finality means that once a transaction is included in a block and that block is added to the chain, it is highly unlikely to be reversed or invalidated, making transactions more secure and settled.
Proof-of-Work:
A transaction block in a Proof of Work (PoW) blockchain is a fundamental component that stores a collection of validated and confirmed transactions. It is part of the blockchain's structure and plays a critical role in securing the network, maintaining the ledger of transactions, and enabling the creation of new blocks in the chain.
1. Header:
Previous Block Hash: A reference to the hash of the previous block in the blockchain, which creates a chronological link between blocks.
Nonce: A random number that miners change repeatedly when attempting to find a valid block hash that meets the PoW requirements.
Timestamp: The timestamp of when the block was created.
Merkle Root: A cryptographic hash of all the transactions included in the block. The Merkle root ensures the integrity of the transactions within the block.
2. Transactions:
A transaction block contains a set of transactions that are being added to the blockchain. These transactions can involve the transfer of cryptocurrency, the execution of smart contracts, or other data updates depending on the blockchain's purpose.
NOTE: Transactions are grouped together into a block to reduce the workload on the network and increase efficiency.
3. PoW Proof:
Miners compete to find a valid PoW proof for the block. This involves repeatedly changing the nonce value in the block's header and hashing it along with the previous block's hash until a hash is found that meets specific criteria, such as having a certain number of leading zeros.
NOTE: Finding a valid PoW proof is computationally expensive and requires a significant amount of computational power, which deters malicious actors from trying to alter the blockchain's history.
4. Difficulty Target:
The blockchain network adjusts the difficulty target periodically to control the rate at which new blocks are added to the blockchain. The difficulty target determines how hard it is to find a valid PoW proof. If blocks are being mined too quickly, the difficulty increases, making it more challenging to find valid proofs, and vice versa.
5. Validation:
Once a miner finds a valid PoW proof, they broadcast the block to the network.
Other nodes on the network validate the block by checking the transactions, verifying the PoW proof, and ensuring that the block adheres to the blockchain's consensus rules.
If the block is valid, it is added to the blockchain, and the transactions it contains are considered confirmed.
6. Reward:
In many PoW blockchains, miners are rewarded with cryptocurrency (e.g., Bitcoin) for successfully mining a block and adding it to the blockchain. This reward serves as an incentive for miners to secure the network.
For any additional questions, please view our other knowledge base articles or contact a support team member via the chat button.