For the uninitiated, the idea of a digital currency that circulates via a peer-to-peer network that doesn't require a trusted third party may seem impossible. But now, it's gaining ground. Taking the concept behind Bitcoin and other cryptocurrencies, the technology underlying these systems is called the blockchain. In this article, we'll give a high-level overview of what it is, what it does and why it's important to business. The Trust Project is a collaboration among news.
There are four main types of blockchain networks: public blockchains, private blockchains, consortium Blockchain Technology, and hybrid blockchains. Each one of these platforms has its benefits, drawbacks and ideal uses.
- Public blockchain
How it works. The first type of blockchain technology is public blockchain. This is where cryptocurrency like Bitcoin originated and helped to popularize distributed ledger technology (DLT). It removes the problems that come with centralization, including less security and transparency. DLT doesn't store information in any one place, instead distributing it across a peer-to-peer network.
- Private blockchain
How it works. A blockchain network that works in a restrictive environment like a closed network, or that is under the control of a single entity, is a private blockchain. While it operates like a public blockchain network in the sense that it uses peer-to-peer connections and decentralization, this type of blockchain is on a much smaller scale. Instead of just anyone being able to join and provide computing power, private blockchains typically are operated on a small network inside a company or organization.
- Hybrid blockchain
How it works. Sometimes, organizations will want the best of both worlds, and they'll use hybrid blockchain, a type of blockchain technology that combines elements of both private and public blockchain. It lets organizations set up a private, permission-based system alongside a public permissionless system, allowing them to control who can access specific data stored in the blockchain, and what data will be opened up publicly.
- Consortium blockchain
How it works. The fourth type of blockchain, consortium blockchain, also known as a federated blockchain, is similar to a hybrid blockchain in that it has private and public blockchain features. But it's different in that multiple organizational members collaborate on a decentralized network. Essentially, a consortium blockchain is a private blockchain with limited access to a particular group, eliminating the risks that come with just one entity controlling the network on a private blockchain.
While these are the four main types of blockchain, there are also consensus algorithms to consider. For example, leased proof of stake allows users to earn money from mining, without the node needing to mine itself. Proof of importance uses both balance and transactions to assign significance to each user.
Ultimately, blockchain technology is becoming more popular and rapidly gaining enterprise support. Every one of these types of blockchain has potential applications that can improve trust and transparency and create a better record of transactions.
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