Blockchain is a technology that enables information to be stored and exchanged on a peer-to-peer (P2P) basis. Fundamentally, blockchain data can be concealed or shared publicly using different forms of consensus-based algorithms. Blockchain functions mostly in a decentralized way and removes the requirement for a trusted third parties or intermediaries.
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Blockchain is the underlying technology on which the world’s first cryptocurrency “Bitcoin” was built. This technology is not only growing in popularity in the financial sector but is the also driving innovations in many other sectors like legal aid, tech industry and the energy sector.
Blockchain technology was intended to solve of four issues:
- Trust during the transaction of value.
- Double spending of one entity of value.
- Arriving at a consensus on the latest correct version of a transaction history
- Corrupt tampering of value exchange record or ledger after transactions are made.
The 3 categories of blockchain are Public Blockchain, Consortium Blockchain and Private Blockchain.
Public blockchains have no single owner and are visible by anyone. Their consensus procedure is available to all the participants, and they are fully decentralized. In this blockchain type, blocks are validated one after the other and cannot be subsequently altered. The network is open to any interested participant and all the participants can be associated with validating the blocks. Blockchain participants can read data, store a copy of the data, and participate in block verifications by making their computing power available. Bitcoin and Ethereum are prime examples of a public blockchain.
Also known as Hybrid blockchain, Consortium blockchains are open to the public but not all information is accessible to all participants. It is fully open just to a privileged group. In this blockchain type, network nodes that are permitted to take part in the consensus process is controlled by known and privileged servers that use a set of rules that are consented to by all parties. Duplicate copies of the blockchain are only distributed among entitled members; hence, these network types are just partly decentralized. An example of a consortium blockchain is R3 consortium, which unites 70 of the world’s biggest financial organizations in a common innovative goal. The EOS blockchain has a consensus algorithm very similar to this blockchain; however, in the EOS network all participants retrieve a copy of the transaction ledgers, like a public blockchain.
These are also called permissioned blockchain. Private blockchains utilize benefits as a means to control who can read from and write to the blockchain. In this network, central authority manages the rights to access or change the database. Consensus algorithms and mining usually aren’t required, as a single element has proprietorship and controls the creation of blocks. An example of private blockchain is Quorum: The American venture capital bank JPMorgan Chase & Co. created this private blockchain, which is designed for the financial service industry.
Private vs Public Blockchain
Private and Public Blockchain has many similarities:
- Both networks claim to be a decentralized distributed systems, where every member keeps a copy of the shared append-only ledger of digitally marked exchanges.
- Both networks guarantee ledger security through decentralization.
- Also, both use the consensus protocol as a means of maintaining ledger synchronization .
Differences between Private and Public Blockchain:
- Public Blockchain is completely open and everyone can join and be a part of the network; while private blockchain gives some amount of authority to the firm or organization that controls the network.
- Public blockchain has low value-based speed owing from the huge pile of information that should be prepared to finish the transaction. Private networks, be that as it may, execute exchanges rapidly.
- A significant disadvantage of the public blockchain protocol is that it requires a good deal of computational power for ledger distribution and confirmation. The consensus procedure for public blockchain is more complicated than private blockchains, which makes the public blockchain’s overall processing activity more costly.
As mentioned above, at the start of this article, blockchain technology is the foundation of all cryptocurrencies. And most cryptocurrencies are built on the premise and functions of public blockchains. Private blockchains are good for a centralized world, while public blockchains empowers the masses and provide a trustless way for all to participate in a general consensus.
Today, in the crypto space, the words “private” and “public” networks are used mostly to distinguish between two types of cryptocurrencies, where a private cryptocurrency is one that allows anonymity of the sender’s profile and transactions, while a public cryptocurrency will allow for the senders profile and transactions to be publicly viewed. If it were up to governments, all cryptocurrencies would be public, as they would be able to easily track tax evasion and illegal money laundering; however, the blockchain is substantiating a new era where privacy could return to the will of the people.
Featured image source: Pixabay.
Edited my Marc Johnson.
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