Understanding Blockchain
Hello everyone, hope you all are doing good? This is the beginning of an exciting series, which promises to be informative and also educative, do well to follow all the parts, as you will definitely gain 1 or 2 useful information from the series. In today's article we would be understanding what blockchain means and the types of blockchains.
Blockchain is made up of digital records(blocks) that stores and secures data. In other words, blockchain are made up of blocks(digital records) that are interconnected with each other, hence, once a data is stored it can not be changed, thus, data are secured.
Blockchain works like this, for instance, first block is A, it is stored. Second block will be A+B=AB, so second block is stored as AB. Third block will be AB+C=ABC, so third block is stored as ABC and it goes on and one. From that illustration above, you can clearly see that blocks are interconnected and it is quite impossible to change blocks, except you are ready to go to the beginning of the first block, and begin the changes, which is almost impossible.
There are some important components that enables the blockchain to function properly, and they are; hash, nodes, blocks and miners. Hash helps to interconnect blocks, in such a manner that they can be altered, hence, hash ensures that data are stored securely. Nodes are computers that hosts, mines and validates blocks in a blockchain. Nodes, ensures the functionality of a blockchain, without nodes, miners won't be updated of the new block, hence, there will be glitch in the blockchain. Blocks are digital data or records that are stored in the blockchain. The digital data stored are transactions that has taken place within the blockchain, and it will be added to the existing blocks when validated by miners, hence, stored and cannot be changed again. Miners are people who are charged with the responsibilities of running the nodes and validating blocks and are rewarded for their efforts with the blockchain native tokens.
What Are The Types Of Blockchains
There are 4 types of Blockchains which are;
- Public Blockchain
- Private Blockchain
- Hybrid Blockchain
- Consortium Blockchain
Public Blockchain: This is the most common and used blockchain. It has no restriction, any one who has internet connection can have access to this blockchain. Public blockchain is known for it's transparency, that's why it is mostly used for electoral voting by countries/states or for keeping records for healthcare establishments. Bitcoin, Ethereum, Litecoin, and others use Public Blockchains.
Advantages
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It is a very transparent, as blocks/transaction are open for everyone to see.
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It is highly secured, data(transactions) can not be altered, as it uses one way encryption.
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It is highly decentralized, as no central authority is present and no one has a say to how the blockchain is run.
Disadvantages
- It is not highly scalable, as a result of it been public, more and more people are free to have connected nodes, which will make transaction lower.
- It is requires high cost for maintenance and mining, as the computers are very expensive and it requires lots of electricity power and cooling power.
- It can be hacked, because it is open to the entire public, malicious hackers can easily gain access to the blockchain.
Private Blockchain: This blockchain has some restrictions, only some selected few can have access to the nodes of the blockchain. It is highly centralized, that's why it is mostly used by small organizations such as banks, schools, private companies, and lots more.
Advantages
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It is highly scalable, as it has limited accessibility, hence, the transaction speed is very high.
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It is more secured than public blockchain, as it is not open to the general public, hence, it becomes more difficult for malicious hacker to gain access to the blockchain.
Disadvantages
- It is not transparent, as transaction are not open for the general public to see.
- Limited access, as only selected few are able to gain access to the blockchain.
- It is highly centralized, as there is a presence of a central authority.
Hybrid Blockchain: This blockchain combines some key features from both the Private blockchains and Public blockchains. There exist some limitation to the access of the nodes of the blockchain, as selected members can decide on such transaction should be made public or private. In some extent, it is transparent, as members may be decide if some transactions should be made public or not. Members don't have ability to alter transactions. It is mostly used by supply chain logistics companies and also Ripples(XRP) operates Hybrid blockchain.
Advantages
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It is highly scalable, as it is not open to the general public, hence, the transaction speed is very high.
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It is requires low cost for maintenance and mining as compared to the public blockchain which is quite expensive to maintain and perform mining operations.
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Data are highly secured, as it is not as accessible as the public blockchain which is open to all.
Disadvantages
- There's still some level of centralization, as there is a presence of a centralized system of operation.
- There's no complete transparency, as some information are made public and some are not made public for all to see.
Consortium Blockchain: This is a type of blockchain which is not given to just a single organization but rather to a group of organizations. It combines the features of both public blockchains and private blockchains. For instance, a bank can't be granted this blockchain, but a group of banks can be granted access to this blockchain. So, this blockchain requires multiple organizations to govern or operate it. It is also known as Federated blockchain. It is currently been used by Corda, Hyperledger and Quorum
Advantages
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It is highly scalable, as only a few selected organizations have access to the blockchain, hence, transaction speed is very high.
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It is ensures accountability, as the central authority only grants limited organizations, hence, each organization are held accountable for their activities.
Disadvantages
- It is centralized, as there's the presence of a central authority, who have a say on how the blockchain is run.
- It can be hacked, hence, less secured, as more than one organization is granted access to the blockchain.
- There's no complete transparency, as not all information are disclosed to the general public to see.
I hope you all found the article interesting and exciting. Do well to share your thoughts about the article in the comment section below. Thanks.
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