Orphan blocks are blocks which are valid and verified but not accepted into the blockchain network. This happens because of a time delay in the acceptance of a block into the blockchain. All transactions of an orphan block are sent back to the memory pool and no funds are lost.
What happens to orphan blocks inside a blockchain?
Orphaned blocks are also called detached blocks as they exist apart from the main chain. The delay in acceptance of a block into the blockchain occurs only after the block has propagated across all nodes in the network to ensure its validity. This induces latency issues and a time delay which may allow two miners or pools to produce a block at almost the same time, thus creating a conflict. In such a scenario, the block with the larger share of proof of work gets accepted. The other block is the orphan block and is discarded.
Another way to create orphan blocks are hackers with sufficient hashing power attempting to reverse a few earlier transactions that occurred on the blockchain network. Due to this reason transactions are considered complete only after the blockchain is six blocks ahead of the block containing the transaction, therefore requiring six confirmations.
Once a block is orphaned, all its transactions are usually sent to the memory pool which is the list of unconfirmed transactions. If a certain transaction is lost from the memory pool, it ceases to exist, that is, it never happened. This is a rare case but if it does occur, the transaction must then be broadcasted again by the original entities involved. No loss of funds occurs. These transactions are then added to the next block accepted on the blockchain.
Miners and orphan blocks
Despite being completely valid blocks, miners do not receive a block reward on most blockchains. On the other hand, miners are rewarded for mining uncle blocks, which are mostly associated on the Ethereum blockchain. Uncle blocks are exactly similar to orphan blocks.