What are Blocks and Why are They Necessary?

Proof-of-Work groups transactions

into blocks and broadcasts it to unrelated parties. 

Therefore, blocks are not suitable for use in a trusted distributed ledgernetwork between financial institutions.

A block structure allows for global broadcast of data and large amounts of unrelated transactions to be confirmedant once. While blocks make sense for public blockchain systems like Bitcoin, this logic does not apply to trusted distributed ledger networks used within financial institutions, like Corda.

A “block” is a bundle of transaction data*. Most closely associated with Bitcoin, a blockchain structure connects blocks such that each block includes the hash value of the previous block, thereby forming a chain of valid transactions

“Miners” create new blocks by validating transactions

through a Proof of Work (PoW) exercise. This PoW exercise allows anyone (without permission) to create valid blocks if

they can expend the required computing power (calculating hashes). This resource-intensive process also creates a financial barrier to deter malicious actors from adding fraudulent blocks

This PoW system deliberately takes time

both to prevent arbitrary coin generation

(which would lead to hyperinflation of the

currency) and to prevent too many

solutions at a given time (once a miner

finds a solution, it must propagate around

the network, which takes time and may

lead to collisions and forks). In Bitcoin, this

interval is an average of 10 minutes. To

accommodate for this delay, transactions

must be batched together and confirmed

in blocks.

In trusted, private distributed ledger

networks, PoW and global broadcast of

transactions are not necessary - it does not

make sense to group unrelated

transactions into blocks that are then

shared with many, unrelated parties. Those

private blockchain systems that do use

blocks most likely use the Bitcoin structure

without considering why Bitcoin works the

way it does.

Corda is different. Recognizing that the

block structure is a flawed design decision

for financial services, R3 deliberately chose

not to use blocks for Corda and its

financial services clients

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