Types of Blockchain Platforms: Public, Private and Consortium
Blockchain platforms can be categorized
into three main types: public, private, and consortium. Each type has its own
characteristics and use cases:
1. Public Blockchain:
- Public blockchains are open and decentralized networks that anyone can join and participate in without permission.
- They are maintained by a distributed network of nodes (computers) operated by individuals or organizations around the world.
- Public blockchains are typically permissionless, meaning that anyone can validate transactions and add new blocks to the chain (mine in the case of Proof of Work).
- Examples of public blockchains include Bitcoin and Ethereum.
Advantages:
- Decentralization: Resistant to control, fostering trust.
- Transparency: Transparent and auditable transactions.
- Security: Strong security due to a large network.
- Global Accessibility: Accessible worldwide.
- Network Effects: Attracts developers and users.
Disadvantages:
- Scalability: Can be slow and costly during high
demand.
- Lack of Privacy: Transactions are visible to all.
- Energy Consumption: Energy-intensive mining.
- Governance Challenges: Difficulty in making upgrades.
2. Private Blockchain:
- Private blockchains are closed networks where only authorized participants can validate transactions and access the blockchain.
- These blockchains are often used within organizations or among a select group of trusted entities.
- Private blockchains provide greater control and privacy compared to public blockchains but sacrifice some of the decentralization and transparency.
- They are often used for internal record-keeping, supply chain management, and other applications where a high degree of control is required.
Advantages:
- Privacy: Enhanced privacy for authorized users.
- Scalability: Efficient for specific organizations.
- Control: Full control for compliance.
- Faster Transactions: Quick confirmations and low fees.
Disadvantages:
- Centralization: Trust depends on operating organizations.
- Lack of Trust: Reputation-based trust.
- Limited Transparency: Less transparent.
- Reduced Security: Lower security compared to public chains.
3. Consortium Blockchain:
- Consortium blockchains are a hybrid between public and private blockchains. They are controlled by a group of organizations rather than a single entity.
- In a consortium blockchain, a predefined set of nodes, often consisting of multiple organizations, work together to validate transactions and maintain the blockchain.
- Consortium blockchains aim to combine the benefits of decentralization and trust among known participants.
- They are commonly used in industries where multiple organizations collaborate on a shared blockchain, such as in financial services and supply chain management.
Advantages:
- Collaboration: Collaboration among a defined group.
- Shared Control: Reduces centralization risk.
- Enhanced Privacy: Better privacy, some transparency.
- Efficiency: More efficient and scalable.
Disadvantages:
- Complex Governance: Managing consortium governance can be
challenging.
- Limited Decentralization: Less decentralized than public chains.
- Membership Management: Adding/removing members can be complex.
- Trust Among Members: Trust among members is crucial.
The differences
between these three types:
|
Parameter |
Public Blockchain |
Private Blockchain |
Consortium Blockchain |
|
Read permission |
Public |
Restricted |
Restricted |
|
Efficiency |
Low |
High |
High |
|
Centralized |
No |
Yes |
Partial |
|
Immutability |
Impossible to tamper |
Could be tampered |
Could be tampered |
|
Determination of consensus |
All miners |
Only one organization |
Designated set of nodes |
Bitcoin:
Coming soon…….
Ethereum:
Coming soon……
Hyperledger:
Hyperledger
is a global collaboration that aims to advance blockchain technology. It is supported
by leading companies in the financial, banking, Internet of Things (IoT),
supply chain management, manufacturing and production, and technology sectors.
The
diagram shows that Hyperledger is made up of a number of different projects,
each of which focuses on a specific area of blockchain technology. For example,
Hyperledger Fabric is a framework for building permissioned blockchains, while
Hyperledger Sawtooth is a platform for building distributed ledger
applications.
The diagram also shows that Hyperledger is designed to be
modular. This means that companies can implement different parts of the
Hyperledger umbrella to create a blockchain solution that meets their specific
needs.
In
simpler terms, the image shows how Hyperledger makes it easier for companies to
use blockchain technology. Hyperledger provides a range of tools and resources
that companies can use to build and deploy blockchain solutions. This can help
companies to improve the efficiency and security of their business processes.
Hyperledger
is a group of companies that are working together to make blockchain technology
better. They provide tools and resources that help other companies to use
blockchain technology in their businesses.
IOTA:
IOTA is a distributed ledger developed to
handle transactions between connected devices in the IoT ecosystem, and its
cryptocurrency is known as MIOTA.
IOTA uses a proprietary technology called
the Tangle, which is a consensus algorithm that requires users to validate two
transactions in order to complete their own IOTA transactions.
IOTA doesn't use blockchain at least, not
in the same way as most other projects. IOTA had a vision of a different type
of blockchain and set about to design its own system of validator nodes, called
Tangle.
IOTA features feeless transactions,
tamper-proof data, as well as low resource demand. Its network can power the
Internet of Things (IoT) without heavy infrastructure investment requirements.
The nonsequential network of nodes that
makes up Tangle is technically referred to as a Decentralized Acyclic Graph
(DAG). As a direct consequence of this, a single node in a Tangle may serve as
a connection to several other nodes.
Merits
1) Free transactions
2) Unlimited scaling
3) Can process any data, not just financial
transactions
4) Hopes to achieve instant transactions
5) No IOTA mining - everyone contributes
6) Quantum resistant
Demerits
1) No finished product yet
2) Unclear when the project will be ready
3) Currently needing to use a centralized coordinator
4) Has experienced lots of technical flaws and bugs
5) Many (including MIT) think it has really bad security
Corda:
Corda is an open-source
distributed ledger technology (DLT) platform designed for business use. It is a
permissioned blockchain, meaning that only known and trusted parties can
participate in the network. This makes Corda well-suited for industries such as
finance, healthcare, and supply chain management, where privacy and security
are critical.
Corda is built on a number of key features,
including:
- Privacy: Corda uses a variety of techniques to ensure
that only the parties involved in a transaction can see the details of
that transaction. This is important for many businesses, which need to
protect their sensitive data.
- Security: Corda is designed to be very secure, with
features such as digital signatures, encryption, and tamper-proof audit
trails. This helps to protect businesses from fraud and other malicious
activity.
- Interoperability: Corda is designed to be interoperable
with other blockchain platforms, making it easy to integrate into existing
systems and networks. This is important for businesses that need to be
able to communicate and transact with other businesses that are using
different blockchain platforms.
Corda is used by a variety of businesses around the
world, including:
- Financial institutions: Corda is used to streamline and
automate financial transactions, such as trade finance, securities
trading, and loan origination.
- Healthcare organizations: Corda is used to share medical records
securely and efficiently, and to manage clinical trials.
- Supply chain companies: Corda is used to track the movement of
goods and materials through the supply chain, and to ensure that payments
are made on time.
Corda is a powerful tool that can help businesses
to improve their efficiency, security, and transparency. It is a particularly
good choice for businesses in regulated industries, where privacy and security
are of paramount importance.
Corda R3:
Corda is a distributed
ledger technology (DLT) platform designed for business use. It is a
permissioned blockchain, meaning that only known and trusted parties can
participate in the network. This makes Corda well-suited for industries such as
finance, healthcare, and supply chain management, where privacy and security
are critical.
R3 is the company that developed Corda. R3 is a
consortium of over 200 banks, financial institutions, and technology companies.
R3's mission is to develop and promote Corda as the leading DLT platform for
business use.
Corda is used by a variety of businesses around the
world, including:
- Financial institutions: Corda is used to streamline and
automate financial transactions, such as trade finance, securities
trading, and loan origination.
- Healthcare organizations: Corda is used to share medical records
securely and efficiently, and to manage clinical trials.
- Supply chain companies: Corda is used to track the movement of
goods and materials through the supply chain, and to ensure that payments
are made on time.
Corda is a powerful tool that can help businesses
to improve their efficiency, security, and transparency. It is a particularly
good choice for businesses in regulated industries, where privacy and security
are of paramount importance.
Here are some of the benefits of using Corda:
- Privacy: Corda uses a variety of techniques to ensure
that only the parties involved in a transaction can see the details of
that transaction. This is important for many businesses, which need to
protect their sensitive data.
- Security: Corda is designed to be very secure, with
features such as digital signatures, encryption, and tamper-proof audit
trails. This helps to protect businesses from fraud and other malicious
activity.
- Interoperability: Corda is designed to be interoperable
with other blockchain platforms, making it easy to integrate into existing
systems and networks. This is important for businesses that need to be
able to communicate and transact with other businesses that are using
different blockchain platforms.
- Scalability: Corda is designed to be scalable,
meaning that it can handle a large number of transactions without
sacrificing performance. This is important for businesses that need to be
able to process a large volume of transactions.
Corda is a powerful and versatile DLT platform that
can be used to improve the efficiency, security, and transparency of a wide
range of business processes.
Consensus Approach:
Consensus in blockchain
refers to the process by which all nodes in a decentralized network agree on
the state of the shared ledger. This is essential for ensuring the security and
integrity of the blockchain, as it prevents malicious actors from tampering
with the data.
There are a variety of different consensus
approaches that can be used in blockchain networks, each with its own
advantages and disadvantages. Some of the most common consensus approaches
include:
- Proof of Work (PoW): In PoW, miners compete to solve
complex mathematical problems in order to earn the right to add the next
block to the blockchain. This process is computationally expensive and
energy-intensive, but it is also very secure.
- Proof of Stake (PoS): In PoS, validators are selected to add
the next block to the blockchain based on their stake in the network. This
means that users with more coins have a higher chance of being selected as
a validator. PoS is generally more energy-efficient and scalable than PoW,
but it is also more vulnerable to certain types of attacks.
- Delegated Proof of Stake (DPoS): In DPoS, users stake their coins to
elect delegates who are responsible for validating transactions and adding
blocks to the blockchain. This approach is more centralized than PoS, but
it is also more scalable and efficient.
- Proof of Authority (PoA): In PoA, a small number of pre-selected
nodes are responsible for validating transactions and adding blocks to the
blockchain. This approach is very fast and efficient, but it is also the
least decentralized.
- Proof of Space (PoSpace) and Proof of Capacity
(PoC): PoSpace and PoC rely on participants' available disk space rather
than computational power. Users allocate their storage space to prove that
they are contributing resources to the network.
The best consensus approach for a particular
blockchain network will depend on its specific requirements. For example, a
blockchain that is designed to be highly secure and resistant to attacks may
choose to use PoW, even though it is less energy-efficient. A blockchain that
is designed to be scalable and efficient may choose to use PoS or DPoS.
Consensus Elements:
Consensus elements in
blockchain are the rules and procedures that govern how the network
participants (nodes) agree on the state of the ledger. These elements are
essential for ensuring the security and integrity of the blockchain network.
The following are some of the key consensus
elements in blockchain:
- Agreement: All nodes in the network must agree on the
state of the ledger, including the order of transactions and the current
balances of all accounts.
- Security: The consensus mechanism must be resistant to
attacks by malicious actors, who may try to manipulate the ledger or
double-spend coins.
- Decentralization: The consensus mechanism should not rely
on any single trusted third party. Instead, it should be distributed among
all nodes in the network.
- Efficiency: The consensus mechanism should be
efficient in terms of time and resources. It should not be too slow or
expensive to reach consensus.
The consensus elements in blockchain are essential
for ensuring the security, integrity, and decentralization of the network. By
carefully considering the different consensus mechanisms available, blockchain
developers can choose the one that best meets their needs.
Consensus Algorithms:
Here brief overview of each consensus algorithm:
- Proof of Work (PoW): Miners compete to solve complex puzzles, consuming energy to validate transactions. Secure but energy-intensive. Used in Bitcoin.
- Proof of Stake (PoS): Validators are chosen based on the amount of cryptocurrency they hold and are willing to stake. Energy-efficient. Used in Ethereum 2.0.
- Delegated Proof of Stake (DPoS): Token holders vote for delegates who validate transactions. Improves scalability. Used in EOS and BitShares.
- Proof of Authority (PoA): Validators are known entities in private or consortium blockchains. Focuses on identity and trust. Used in Quorum.
- Proof of Space (PoSpace): Miners allocate storage space to secure the network. Energy-efficient. Used in Chia.
- Proof of Time (PoT): Participants prove they've held cryptocurrency for a set period. Encourages long-term commitment.
- Proof of History (PoH): Used in Solana, PoH helps nodes agree on the order of transactions without central authority.
- HoneyBadgerBFT: Byzantine Fault Tolerant for permissioned blockchains, offering high throughput and security.
- Tendermint: Combines PoS and BFT, providing fast finality and security. Used in Cosmos.
- Raft: User-friendly consensus algorithm used in some blockchains for simplicity and understandability.
Each consensus algorithm addresses specific needs
and trade-offs in the blockchain ecosystem, catering to different use cases and
goals.
Proof of Work:
Proof of work (PoW) is a
consensus mechanism used by many blockchains to validate transactions and add
new blocks to the chain. It is a decentralized process that requires network
members to expend effort in solving an encrypted hexadecimal number. The first
miner to solve the puzzle is rewarded with cryptocurrency.
How PoW works:
- Miners collect pending transactions and group
them into a block.
- The miners then add a header to the block,
which contains information such as the previous block hash and a nonce.
- The miners then hash the block header. A hash
is a unique cryptographic fingerprint of a piece of data.
- The miners then try to adjust the nonce until
the hash of the block header is less than a certain target value. This
process is called mining.
- The first miner to find a valid nonce
broadcasts the block to the network.
- The other nodes on the network verify the
block by recalculating the hash of the block header. If the hash is less
than the target value, the block is accepted and added to the blockchain.
Advantages of PoW:
- PoW is a proven and secure consensus
mechanism. It has been used by Bitcoin since its inception in 2009 and has
never been successfully hacked.
- PoW is decentralized, meaning that there is no
single entity that controls the network. This makes it resistant to
censorship and attack.
- PoW is permissionless, meaning that anyone can
participate in the network. This helps to ensure that the network is fair
and open to all.
Disadvantages of PoW:
- PoW is energy-intensive. Miners use
specialized computers called ASICs to solve the mining puzzles. These
computers consume a lot of electricity.
- PoW can be slow. It can take several minutes
to add a new block to the blockchain.
- PoW is vulnerable to 51% attacks. If a single
miner or group of miners controls more than 50% of the network's hashrate,
they could potentially manipulate the blockchain.
Examples of PoW
blockchains:
- Bitcoin
- Ethereum (until it transitions to PoS)
- Litecoin
- Dogecoin
- Bitcoin Cash
Byzantine General problem:
The Byzantine generals problem is a game theory problem, which describes the difficulty decentralized parties have in arriving at consensus without relying on a trusted central party.
In a network where no member can verify the identity of other members, how can members collectively agree on a certain truth?
The Byzantine generals problem describes the difficulty decentralized systems have in agreeing on a single truth.
The Byzantine generals problem plagued money for millennia, until the invention of Bitcoin.
Bitcoin uses a Proof-of-Work mechanism and a blockchain to solve the Byzantine generals problem.
Bitcoin's ruleset is objective, so there is no disagreement about which blocks or transactions are valid, allowing all members to agree on a single truth.
Imagine a group of generals planning to attack a city together. To succeed, they must all attack at the same time. However, they can't trust their messages because the enemy could intercept or alter them.
So, how do they coordinate their attack when they can't communicate securely? This problem is called the Byzantine Generals problem.
This challenge mainly affects decentralized systems where there's no central authority to rely on for information or verification.
Proof of Stake in blockchain:
Proof of stake (PoS) is a consensus mechanism used to verify new cryptocurrency transactions. It differs from proof-of-work (PoW) significantly, mainly in the fact that it incentivizes honest behavior by rewarding those who put their crypto up as collateral for a chance to earn more.
In a PoS system, validators are chosen to validate new blocks and add them to the blockchain based on the amount of cryptocurrency they have staked. The more cryptocurrency a validator stakes, the more likely they are to be chosen. Validators are rewarded with cryptocurrency for each block they validate successfully.
If a validator attempts to cheat or act dishonestly, they can lose some or all of their staked cryptocurrency. This helps to ensure that validators are honest and act in the best interests of the network.
PoS has a number of advantages over PoW, including:
- It is more energy-efficient. PoS does not
require miners to compete to solve complex mathematical problems, which
can be very energy-intensive.
- It is more secure. PoS makes it more difficult
for attackers to take control of the network, as they would need to stake
a large amount of cryptocurrency.
- It is more scalable. PoS can handle more
transactions per second than PoW.
Here is a simplified example of how PoS works:
- Validators stake their cryptocurrency.
- A validator is chosen to validate the next
block.
- The validator validates the block and adds it
to the blockchain.
- The validator is rewarded with cryptocurrency
for validating the block.
- If the validator attempts to cheat or act
dishonestly, they can lose some or all of their staked cryptocurrency.
Proof of Elapsed Time in blockchain:
Proof of Elapsed Time
(PoET) is a blockchain consensus algorithm that uses a fair lottery system to
determine who creates the next block. It was developed by Intel Corporation and
is used in the Hyperledger Sawtooth blockchain platform.
PoET works by assigning a random wait time to each
node in the network. The node with the shortest wait time will wake up first
and win the right to create the next block. This ensures that every node has an
equal chance of winning, regardless of its hardware or processing power.
To prevent cheating, PoET uses a Trusted Execution
Environment (TEE) to generate and verify wait times. A TEE is a secure
environment that is isolated from the rest of the system. This makes it
impossible for nodes to tamper with their wait times or to fake the results of
the lottery.
PoET has a number of advantages over other
consensus algorithms, such as Proof of Work (PoW). It is more energy-efficient
and secure, and it is also more scalable. PoET is also well-suited for
permissioned blockchain networks, where the nodes are known and trusted.
Here is a simplified example of how PoET works:
- Each node in the network is assigned a random
wait time.
- All nodes go to sleep for their assigned wait
time.
- The node with the shortest wait time wakes up
first.
- The winning node creates the next block and
broadcasts it to the network.
- All other nodes verify the block and add it to
their own copy of the blockchain.
Proof of Activity in blockchain:
Proof of Activity (PoA) is
a hybrid consensus algorithm that combines elements of both Proof of Work (PoW)
and Proof of Stake (PoS). It was first proposed in 2013 by the Decred team, and
is currently used by a handful of blockchain projects, including Decred and
Espers.
PoA works by having a small set of pre-selected
validators who are responsible for mining new blocks and validating
transactions. To be eligible to be a validator, nodes must stake a certain
amount of the blockchain's native token. This stake is used to incentivize
validators to behave honestly, as they will lose their stake if they attempt to
cheat the system.
To mine a new block, a validator must first solve a
cryptographic puzzle. This puzzle is similar to the puzzles that are used in
PoW, but it is much less computationally intensive. Once a validator has solved
the puzzle, they can propose a new block to the network. Other validators will
then vote on the proposed block. If the majority of validators approve the
block, it is added to the blockchain.
PoA offers a number of advantages over both PoW and
PoS. First, it is much more energy-efficient than PoW, as validators do not
need to compete with each other to solve complex mathematical problems. Second,
it is more secure than PoS, as validators are incentivized to behave honestly
by the risk of losing their stake. Third, it is more scalable than PoW, as the
number of validators is limited.
Advantages of Proof of Activity (PoA):
- Energy
Efficiency: PoA reduces energy consumption compared to
traditional PoW, making it more environmentally friendly.
- Security: It
inherits PoW's robust security against attacks, enhancing network safety.
- Fairness: PoA
promotes equitable rewards by allowing stakers to participate in block
creation.
Disadvantages of Proof of Activity (PoA):
- Complexity: Combining PoW and PoS makes PoA more intricate and potentially less accessible.
- Centralization Risk: Large stakeholders can exert significant control, potentially leading to centralization.
- Stake-based Attacks: Attackers with substantial stakes pose a risk to the network's security.
- Limited Adoption: PoA is less widespread than other consensus mechanisms, affecting network strength and liquidity.
- Blockchain Forking: Disputes between miners and minters may lead to blockchain forks, complicating governance.
Proof of Burn in blockchain:
Proof-of-Burn (PoB) is a
consensus mechanism used in blockchain technology. It is an alternative to
Proof-of-Work (PoW), which is the consensus mechanism used by Bitcoin and other
popular cryptocurrencies.
In PoB, miners verify transactions by burning
tokens, which are destroyed and removed from circulation. The amount of tokens
that must be burned is determined by the algorithm of the blockchain. The more
tokens that are burned, the more secure the network is.
Advantages of Proof of Burn (PoB):
- Sybil Resistance: PoB deters malicious actors by making them burn tokens, ensuring a more secure network.
- Decentralization: Participants must own tokens, promoting a wider distribution of network ownership.
- Incentives for Commitment: Burning tokens showcases dedication to
the network, fostering alignment among validators.
Disadvantages of Proof of Burn (PoB):
1. Initial Token Distribution: PoB may lead to early
adopter wealth concentration.
2. Economic Loss: Destroying tokens can be
viewed as wasteful.
3. Limited Adoption: PoB is less popular than
PoW and PoS, limiting its appeal.
4. Complexity: Implementing PoB can be
intricate, requiring additional mechanisms.
5. Security Concerns: PoB may not be as
battle-tested as other mechanisms.
Here are some examples of blockchains that use PoB:
- Ethereum is planning to transition from PoW to
PoB in 2022.
- Solana is a Layer 1 blockchain that uses PoB.
- Cardano is a Layer 1 blockchain that is also
planning to transition to PoB.
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