The Blockchain

November 20, 2017

Intro:

A few weeks ago i bought some coins to test with and to see what the possibilities are.
From that point on i'm constantly learning about blockchain technology and crypto trading. In this section i will discuss the blockchain technology, what it can do and what the applications are.

What is a blockchain?

its technology that can manage decentralized data in such a way it can't be altered once it is put on the network.
A blockchain is a peer to peer network that exists of nodes all over the world. All these nodes have every piece of data that has been put on the blockchain.
The blockchain technology is the backbone of every cryptocurrency. Its called Block-Chain because new data are put in blocks, and when verified it is put at the end of the previous verified block.
This forms a chain that can't be altered.

 

Types of Blockchains:

Public Blockchains:
With a public blockchain anyone can participate, without permission. It is Proof of Work Based. (PoW)
(1) Anyone can download the code and start running a public node on their local device, validating transactions in the network, thus participating in the consensus process – the process for determining what blocks get added to the chain and what the current state is.
(2) Anyone in the world can send transactions through the network and expect to see them included in the blockchain if they are valid.
(3) Anyone can read transaction on the public block explorer. Transactions are transparent, but anonymous/pseudonymous.

Examples:

  • Bitcoin
  • Ethereum
  • Monero
  • Dash
  • Litecoin

Effects:

  • reduces transaction costs and data redundancies and replaces legacy systems, simplifying document handling and getting rid of semi manual compliance mechanisms.
  • in that sense it can be seen as equivalent to SAP in the 1990’s: reduces costs, but not disruptive!

 

Consortium Blockchains:
Consortium Blockchains operate under the leadership of a group. As opposed to public Blockchains, they don’t allow any person with access to the Internet to participate in the process of verifying transactions.
This type is faster (higher scalability) and provide more transaction privacy. Mostly used in the banking sector.
The consensus process is controlled by a pre-selected set of nodes.

Example:

  • R3 (Banks)
  • EWF (Energy)
  • B3i (Insurance)
  • Corda

Effects:

  • reduces transaction costs and data redundancies and replaces legacy systems, simplifying document handling and getting rid of semi manual compliance mechanisms.
  • in that sense it can be seen as equivalent to SAP in the 1990’s: reduces costs, but not disruptive!

 

Private Blockchains:
Write permissions are kept centralized to one organization. Read permissions may be public or restricted to an arbitrary extent.
Example applications include database management, auditing, etc. which are internal to a single company, and so public readability may in many cases not be necessary at all.
In other cases public audit ability is desired. Private blockchains are a way of taking advantage of blockchain technology by setting up groups and participants who can verify transactions internally.
This puts you at the risk of security breaches just like in a centralized system, as opposed to public blockchain secured by game theoretic incentive mechanisms.
However, private blockchains have their use case, especially when it comes to scalability and state compliance of data privacy rules and other regulatory issues.
They have certain security advantages, and other security disadvantages (as stated before).

Examples:

  • MONAX
  • Multichain

Effects:

  • reduces transaction costs and data redundancies and replaces legacy systems, simplifying document handling and getting rid of semi manual compliance mechanisms.

 

How the blockchain network works.

Everybody thats want to participate in the blockchain network needs to download the blockchain code. This way you become a node in the network. The blockchain code is a peer to peer network that distributes the full blockchain over all its nodes. Manny dApps ( Decentralized Applications ) include a wallet in the downloaded code so you can store the currency locally.

 

Useful Links:

Blockchain by example