Dear friends,
In the first part I wrote about what is blockchain and its different uses and applications. . Blockchain, the technology behind Bitcoin, seems to be the driving technology behind the next generation
Internet, also referred to the Decentralized Web, or the Web3. The blockchain is a novel solution to the
age-old human problem of trust. It provides an architecture for so-called trustless trust. It allows us to trust the outputs of the system without trusting any actor within it.
In this post I am going to share different types of blockchain.
Types of blockchains :-
Currently, there are three types of blockchain networks — public blockchains, private blockchains and consortium blockchains.
Public blockchains -
A public blockchain has absolutely no access restrictions. Anyone with an Internet connection can send transactions to it as well as become a validator ( participate in the execution of a consensus protocol).Usually, such networks offer economic incentives for those who secure them and utilize some type of a Proof of Stake or Proof of Work algorithm.
Example: Bitcoin, Litecoin etc
On Bitcoin and Litecoin blockchain networks anyone can do the following things that make it truly public blockchain.
—>Anyone can run BTC/LTC full node and start mining.
—>Anyone can make transactions on BTC/LTC chain.
—>Anyone can review/audit the blockchain in a Blockchain explorer.
Some more of the largest, most known public blockchains are the Ethereum blockchain, Dash, lisk etc.
Effects: (1) Potential to disrupt current business models through disintermediation.
(2) No infrastructure costs: No need to maintain servers or system admins radically reduces the costs of creating and running decentralized applications (dApps).
Private blockchains-
A private blockchain is permissioned. One cannot join it unless invited by the network administrators. Participant and validator access is restricted. In Private Blockchain, all permissions are kept centralized to an organization. Companies who wanted to create own currencies started using this type of Blockchain.
This type of blockchains can be considered a middle-ground for companies that are interested in the blockchain technology in general but are not comfortable with a level of control offered by public networks. Typically, they seek to incorporate blockchain into their accounting and record-keeping procedures without sacrificing autonomy and running the risk of exposing sensitive data to the public internet.
Examples – Multichain, Blockstack
Consortium blockchains / Federated Blockchain -
A consortium blockchain is often said to be semi-decentralized. It, too, is permissioned but instead of a single organization controlling it, a number of companies might each operate a node on such a network. The administrators of a consortium chain restrict users' reading rights as they see fit and only allow a limited set of trusted nodes to execute a consensus protocol.
Example- Ripple.
Effects: (1) Reduces transaction costs and data redundancies and replaces legacy systems, simplifying document handling and getting rid of semi manual compliance mechanisms.
(2) In that sense it can be seen as equivalent to SAP in the 1990’s: reduces costs, but not disruptive!
Now I want to hear from you: What do you think about blockchain technology? What’s your thought on different types of blockchains? Let me know in the comments section below.
Next I shall make more informative articles about Blockchain, cryptocurrency, Digital assets, cryptoeconomy etc.
Thanks and waiting for your comments / feedback.
