Introduction
Everyone has begun experiencing the potential of Blockchain with the increasing demand for this technology. In its initial days, Blockchain ushered disruption in the financial industry, but now its uses have been accepted across various industries.
Since organizations have started to explore the capability of this technology by building Blockchain applications, the demand for Blockchain platforms has risen exponentially. So now, we are coming to an essential point, i.e., understanding the different Blockchain technologies available in the market.
Different Types of Blockchain Technologies
Bitcoin
The initial starting point of Blockchain was Bitcoin. Satoshi Nakamoto introduced Bitcoin in his white paper of 2008, and Bitcoin was the first cryptocurrency to come into the market. In 2008, he created Bitcoin, and in 2009 he made it public.
Bitcoin represented the introduction of cryptocurrencies and their potential in this word. The Blockchain network uses transactions to create other transactions, and Bitcoin uses those exact transaction mechanisms. We call them unspent transaction outputs. The main principle behind a Bitcoin transaction is that the transactions themselves are interlinked. Then, there are scripts, which are the validation processes for Bitcoin transactions. They validate whether one person has five Bitcoins to transfer to friend A and whether friend A has a valid address, which is a valid account inside the Bitcoin network where you want to make the transaction. Scripts also check whether these transactions are being recorded on different networks or a private peer-to-peer network. Scripts verify and validate Bitcoin transactions. Then, there is metadata.
Metadata is the data associated with the transactions. Currently, on the Bitcoin network, you can send up to 1MB of data with your transaction. Metadata carries details about the transaction and any additional comments you want to add to the Bitcoin transaction. Metadata can be used in two ways, as a storage unit as well as a database unit where you are storing some data. Because the transaction happens on the Bitcoin network, it is a permanent transaction that cannot be changed or tampered with, and you can then use the data within your applications or projects. Moreover, there is a consensus algorithm known as the Proof-of-Work algorithm, which in conjunction with the timestamp of the transaction, validates the block.
Basically, Proof-of-Work means any transaction that happens on the Blockchain network that has some associated puzzle to be solved for that transaction to be successful. By puzzle, we mean the ‘nonce’ which is a random number that the miners are trying to work out.
Ethereum
It is a blockchain that is based on Bitcoin, but it has certain functionalities that make it much stronger in the market. Ethereum is the brainchild of Vitalik Buterin. He came up with a process whereby Turing-complete virtual machines are created, called the Ethereum Virtual Machine.
Ethereum is a mathematical project where a system is beng created, and its primary functions creating Smart contracts. Smart contracts are currentuy used in vanous ways behind various Systems. To get you started with smart contracts, think of them as traditional paper-based contracts, such as rental agreements, but online instead. Within the smart contracts, you can mention certain rules where all the parties connect to that smart contract and then need to follow the rules mentioned inside it.
When it started, it was created in a language called Solidity. Solidity is a combination of C++ and java script; its not too difficult to learn. So the main challenge faced by ethereum is stability. Ethereum is currently trying to solve this problem and they have come up with the new consensus protocol called Proof-of-Stake. Up until now, we have only discussed the Proof-of-Work algorithm where the miners are trying to guess the random number and when they even come close to the random number, the transactions are contirmed. But Proof-of-stake is a ditferent process. With Proof-of-stake, you need to have some stake (cryptocurrency) on the Blockchain itselt, i.e., stakeholders.
Imagine that a Blockchain has l00 coins, where person A has stake of 80 coins, and person B has a stake or 20 coins. Now, wnenever a transaction happens, there is a specific fee applicable to that transaction. There is a certain fee associated with the transaction which is being awarded to the miners, apart from the block mining rewards. In contrast, while using Proot-of-stake, whenever a transaction happens, person A Will take 80% of the fees, and person B will receive 20% of the fees because A has 80% of the coins on the Blockchain and B has only 20% of the coins. The percentage of your stake determines the percentage of your fees you will receive. While ethereum is still using Proof-of-work, they are working hard on developing Proof-of-stake for use.
Hyperledger
Hyperledger began out as an open-supply collaborative attempt to create a platform for developing your personal Blockchain solution. One of the critical traits of Hyperledger is that it does now no longer help any cryptocurrency. Unlike Bitcoin and Ethereum, that have their personal native cryptocurrencies. The Linux Foundation hooked up this platform in 2015. Currently, hyperledger is furnished for, through nearly 100+ members, and this consists of technological giants like IBM, Intel, Samsung, J. P. Morgan, etc.
It’s a Blockchain platform inside which you may outline your personal rules, permissions, and efforts to host Blockchain. It acts because the running machine of marketplaces, data-sharing networks, micro-currencies, and decentralized virtual communities. It has the capacity to hugely decrease the charges and headaches in getting matters accomplished withinside the actual world. For example, in case you want to host your public chain, there may be a totally complex process for doing so. But with hyperledger, the software program proves that it’s far convenient to host your personal public Blockchain so that you may create smart contracts.
Public & Private Blockchain
Public Blockchain
A Public Blockchain, also known as a permissionless Blockchain, is open to all, and everyone can read as well as write over the data. In a public Blockchain, you don’t need any authorization as you have open access to all the data. Moreover, if the Blockchain is public, the rules are very complicated, along witha complex consensus algorithm for better security. In this section, we will discuss complex consensus algorithms in detail, along with Proof-of-Work and Proof Of-Stake. Miners use these algorithms to confirm transactions over the Blockchain. A public Blockchain has more complex consensus algorithms as compared to a private Blockchain because, in a private Blockchain, the permission is limited to a group of people who are accessing the network. So in a private Blockchain, you don’t need miners to solve a complex problem wasting precious time because the data needs to be confirmed very quickly.
In the case of a complex consensus algorithm, they are computation ally more expensive to mine into a block. No one owns a public Blockchain; hence it has no central authority or a single person holding it. Even Satoshi, who started the white paper for bitcoin, transferred everything to the public in 2009. So all the public Blockchains are open, which means no one owns them, and you can read and write data over it. The Bitcoin Blockchain and Ethereum Blockchain are the best examples of public Blockchains.
Private Blockchain
Private Blockchain, as the name suggests, is for personal use. It can be used with your existing applications to make them even more secure. Such networks allow you to provide significant permissions like you can authorize the nodes connecting to the network. Nodes are nothing but different computers connected inside the peer-to-peer network running the Blockchain codes. In a private Blockchain, you can provide permissions as to who can read the data and who can transfer the data. You can even offer authorization in a way that only person A has the permission to transfer money, and person B can only view this data. Private Blockchain has less security as compared to a public Blockchain because, in a private Blockchain, we make it easily accessible to a certain trusted group of people and not millions.
Also, if you are using a private Blockchain (like Hyperledger or Corda), then you can have the same kind of security as a public Blockchain or bitcoin, and one authorized node can be the arbitrator for any dispute. Now you know that the private Blockchain is for those who want to have more control over the Blockchain, who want to be the authority governing the Blockchain. A few good examples of a private Blockchain are RecordsKeeper Blockchain, Hyperledger, Corda, Quorum, etc.
Blockchain Ecosystem
Blockchain Exchanges
Every Blockchain project has a robust ecosystem working under it, based on a decentralized exchange. These are developed by the Blockchain team or the community of other developers. A typical exchange is designed to find the cheapest rates of exchange between any two cryptocurrencies, making it more afordable to trade tokens/crypto currencies. Exchanges are used tor trading and can be integrated with hardware wallets, or users can create their wallets on the exchange websites.
Blockchain Miners
For a Blockchain to function and maintain its integrity, it needs a large network of independent nodes from around the world to maintain it continuously. In a private Blockchain, a central organization has authority over every node on the network. On the other hand, in case of a public Blockchain, anyone can set up their computer to act asa node. The owners of these computers are called miners. Since the integrity of the Blockchain is directly related to the number of independent mining nodes in the network, there also exists an incentive model for mining. Different Blockchains utilize different mining systems. However, most of them contain some form of an incentive system or a consensus algorithm in the Blockchain network.
Blockchain Developers
Blockchain technology is built by the potential developers working on it. A strong team of developers can establish an incredible Blockchain project. At present, the types of developers in the Blockchain ecosystem are Blockchain developers. Blockchain developers build new Blockchains with different levels of functionalities and consensus algorithms. DApp developers work with decentralized applications that can run on Blockchains, thus providing a similar functionality like Google Play Store over Blockchain Technology. The development of Smart Contracts over a Blockchain has opened the possibility for developers to create extensive applications and use cases for industries.
Blockchain Applications
Apart from exchanges, platforms, and users, another vital aspect of the Blockchain ecosystem is the development of applications that industries, developers, and communities built to serve a specific purpose. There are various examples of applications being built upon the Blockchain. Some of these examples are CryptPad, which is a decentralized document creating application or Humaniq, a fintech startup connecting unbanked people with the global economy. Another one is Augur, which is a peer-to-peer oracle and prediction market place or Filament, which is Building IOT (Internet of Things) applications over the Blockchain.
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