Blockchain Technology
Introduction
Blockchain technology is
an advanced database mechanism that allows transparent information sharing
within a business network. A blockchain database stores data in blocks that are
linked togethe
Blockchain was invented by Satoshi
Nakamoto.
Features
Immutable
Immutability
means that the blockchain is a permanent and unalterable network. Once a
transaction is recorded on the blockchain, it cannot be modified or deleted.
Distributed
All network
participants have a copy of the ledger for complete transparency. A public
ledger will provide complete information about all the participants on the
network and transactions. The distributed computational power across the
computers ensures a better outcome.
Decentralized
Blockchain
technology is a decentralized system, which means that there is no central
authority controlling the network. Instead, the network is made up of a large
number of nodes that work together to verify and validate transactions. Each
and every node in the blockchain network will have the same copy of the ledger.
Secure
All the records
in the blockchain are individually encrypted. Using encryption adds another
layer of security to the entire process on the blockchain network.
Every information on the
blockchain is hashed cryptographically which means that every piece of data has
a unique identity on the network. All the blocks contain a unique hash of their
own and the hash of the previous block. Due to this property, the blocks are
cryptographically linked with each other.
Consensus
The consensus
algorithm is what makes blockchain technologies highly effective. It is an
integral feature of every blockchain and indeed is a defining characteristic.
To put it simply, consensus is a decision-making process for the group of nodes
active on the network. Here, the nodes can come to an agreement quickly and
relatively faster.
Unanimous
All the network
participants agree to the validity of the records before they can be added to
the network. When a node wants to add a block to the network then it must get
majority voting otherwise the block cannot be added to the network. A node
cannot simply add, update, or delete information from the network. Every record
is updated simultaneously and the updations propagate quickly in the network.
So it is not possible to make any change without consent from the majority of
nodes in the network.
Faster Settlement
Traditional
banking systems are prone to many reasons for fallout like taking days to
process a transaction after finalizing all settlements, which can be corrupted
easily. On the other hand, blockchain offers a faster settlement compared to
traditional banking systems. This blockchain feature helps make life easier.
Applications of Blockchain
·
cryptocurrency
·
supply chain management
·
identity verification
·
voting systems.
Types of Blockchain
·
Public Blockchain.
The public blockchain is a permissionless distributed
ledger technology that allows anyone to join and conduct transactions. It is an
open variant in which each user keeps a copy of the ledger. It implies that
anyone with access to the internet can explore the public blockchain.
The bitcoin public blockchain was among the first
public blockchains to be made available to the general public.
·
Private Blockchain.
a private blockchain is as one that operates in a
constrained setting, such as a closed network. Additionally, it is a blockchain
with permissions that are managed by an organization.
·
Hybrid Blockchain.
The easiest way
to describe a hybrid blockchain is as a blend of a private and public
blockchain. It has applications in organizations wishing to implement the
greatest private and public blockchain features.
·
Consortium Blockchain.
When an organization needs both public and private
blockchain functionality, a consortium blockchain (sometimes referred to as
federated blockchains) is an innovative way to address the issue. Some
organizational characteristics in a consortium blockchain are made public,
whereas others are kept private.
The four types of Blockchain
compared
|
|
Public |
Private |
Hybrid |
Consortium |
|
Permission |
Permissionless |
Permissioned |
Permissioned & Permissionless |
Permissioned |
|
Control |
No control by a central authority |
control by a central authority |
control by a central authority |
control by multiple central authority |
|
Main Advantage |
Independence Transparency |
Performance Scalability |
Performance Low cost |
Performance Security |
|
Main Disadvantage |
Performance Scalability Security |
Trust Auditability |
Transparency Upgrading |
Transparency |
|
Use Cases |
Cryptocurrency Document Validation |
Supply Chain Asset Ownership |
Medical Records |
Banking Supply Chain |
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