Blockchain or Chains of Blocks exist
The Bitcoin White Paper was published by Satoshi Nakamoto in 2008 and unexpectedly landed on a crypto mailing list with different developers.
But it was not until January 3, 2009, that the first block of the Bitcoin blockchain was generated. It was called the Genesis block, presenting itself as open source software that anyone can view and even adapt for their use.
The first block was extracted six days later, on January 9, 2009.
On April 18, 2011, the first Bitcoin fork occurred, intending to add more uses to the blockchain: Namecoin.
This happens because, as the Bitcoin protocol is “Open Source,” anyone can take the protocol and modify the code (creating a fork) and start their version of P2P money (peer-to-peer network).
Unlike Bitcoin, Namecoin can store data within its blockchain.
The original proposal for Namecoin called for a decentralized DNS (Domain Name System) system that used the Bitcoin database directly. Anticipating scalability difficulties, it was decided to create a new digital currency separate from bitcoin.
The Idea of Blockchain
Since then, many so-called alt-coins emerged and tried to be better, faster, and more anonymous than Bitcoin.
Soon, the code was being modified not only to create better cryptocurrencies but also to try to alter the idea of blockchain beyond the use case of P2P money. And many euphorias began to flourish around “blockchain is the real invention, not Bitcoin.”
Right now, optimism has risen so high that the difference between blockchains for P2P currencies and blockchains developed by companies, governments, and consortiums has been distorted. Therefore, let us clarify these issues by taking a closer look at the different types of blockchain and what they are for.
The idea is that blockchainscould be used for any type of value transaction or agreement between two parties, such as P2P insurance, P2P energy exchange, P2P transport sharing, etc.
With this intention, the Ethereum Project decided to create its blockchain on July 30, 2015, with different properties than that of Bitcoin and deploying a layer of smart contracts to offer a radical new way of creating online markets and programmable transactions.
On the other hand, private institutions like banks realized they could use the core idea of blockchain as Distributed Ledger Technology (DLT) and create permissions (private or federated) blockchains.
Blockchain in the context of permissioned private ledger is highly controversial and disputed. This is why Distributed Ledger Technologies emerged as a more general term.
On the one hand, private blockchains are valid for solving problems of efficiency, security, and fraud within traditional financial institutions. However, they are not very likely to revolutionize the financial system.
On the other hand, public blockchains have the potential to replace many of the functions of traditional financial institutions with software, changing the way the financial system works. Still, they are not adapted to the needs of the private company.
This difference between the benefits different entities seek gives rise to different types of blockchain. Mainly there are 3 that arise with the introduction of blockchain technology.
The big difference between public and private blockchainsis related to who has access to participate in the network, running the consensus protocol, and maintaining the blockchain.
A public blockchain network is open, and anyone can join and participate. The network typically has a game theory-based incentive mechanism that encourages more participants to join the network. Bitcoin remains today the largest public blockchain in production.
A private blockchain network requires an invitation validated by the network’s creator or by a set of rules when the creator created the network.
Companies that open a private blockchain typically do so with a permissioned network to restrict who can participate in the network and transact. The access control mechanism may vary; it may be the participants who decide future entrants or a regulatory authority that grants the licenses to participate. Once an entity has joined the network, it will play a role in maintaining the blockchain.
Federated or consortium blockchain
This type of blockchain eliminates the complete autonomy of a single entity over a blockchain.
Basically, in this type of network, a group of represented companies or individuals come together to make better decisions for the entire network. These groups are called consortiums or federations.
Unlike public blockchains, they do not allow anyone with internet access to participate in verifying transactions. Federated Blockchains are faster (more scalable) and provide more transaction privacy.
Consortium blockchainsare used in the banking sector and the energy sector.
A group of pre-selected nodes controls the consensus process. For example, one can imagine a group of 15 financial institutions, each operating a node and of which 10 must sign each block for the block to be valid.
Blockchain (or chain of blocks ) is one of the most interesting technologies today and a pillar of the popular digital currency Bitcoin. Like the World Wide Web in its time, Blockchain has the potential to transform many industries. It can make processes more efficient, transparent, and secure.
For governments, multinationals, investors, and entrepreneurs, it is much more than just a pioneering technology.
The prestigious magazine The Economist defines it as a distributed database that maintains a list of records, or blocks, that is continually growing. One cannot change the information within a block since each block has a timestamp and a link to a previous block. Blockchains innately behave like a digital and public inventory.
Blockchain is a way of structuring data and the basis of cryptocurrencies like Bitcoin, which was the pioneer, or others like Dogecoin, Ripple, NeuCoin, Litecoin, etc.
This encryption breakthrough – consisting of concatenated blocks of transactions – allows competitors to share a digital ledger over a computer network without a central authority. No part has the power to manipulate the records: mathematical algorithms preserve the integrity of all of them.
In addition, depending on the type of Blockchain, it is decentralized – no one person or company controls the data input or its integrity. However, every computer on the network constantly verifies the entire blockchain. All its points have the same information; the corrupt data at point “1” cannot be part of the Blockchain as it does not match the equivalent data at points “2” and “3”.
The use of digital signatures on Blockchain-based data, accessed when authorized by multiple users, can control the availability of medical records and thus maintain their privacy. A conglomerate of insurers, patients, doctors, and hospitals can also be part of the entire Blockchain, reducing payment fraud in the healthcare sector.
In the Financial Sector
Today interbank transactions can take many cases, days to be approved and finally entered, especially outside office hours. With Blockchain, they are processed at any time, and the time to be completed can be reduced to minutes.
In Legal Services
Blockchains can bring together large amounts of data, such as entire contracts. Certain industries can benefit through “smart contracts” or systems that enforce or facilitate the execution of contracts through the help of Blockchain. As an entity that monitors compliance with the law, the middleman can be removed from the equation through these smart contracts if the payments are completed according to the agreed parameters. The peculiar nature of the smart contract means that it is easily fulfilled by electronic means, ensuring that its control does not fall on a single party.
Unauthorized access or modification of vital defense infrastructures, such as network firmware or operating systems, can seriously compromise national security. IT systems and Defense infrastructure are usually distributed in different locations. Suppose this distribution is based on Blockchain technology throughout more than one data center. In that case, access depends on a consensus regarding modifying and preventing attacks on vital parts of equipment and networks.