What is Blockchain? A Small Introduction
Blockchain is an open and distributed ledger that can be used to record transactions between two parties. This way of recording a transaction is both permanent as well as verifiable, which makes it one of the best ways to keep transactions. Blockchains are built on the open-source platform. So different versions of these blockchains are possible, which are developed as per the needs of different industries.
As blockchain is a distributed ledger, hence every transaction is stored on more than one computer, which makes us sure that every transaction is going to be permanent without any fear of loss. As blockchain is distributed, it can neither be owned nor be fully controlled by a single entity.
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Transactions are between two parties, and no other parties are involved, this results in lower cost, and once a transaction is performed, it cannot be changed under any circumstances.
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Different Types of Blockchain
Now, as we are clear about blockchain technology, we must look into different types of blockchains, which are categorized by the applications of blockchain.
- Public Blockchain
- Private Blockchain
- Consortium / Hybrid Blockchain
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1) Public Blockchain
Simply said, publicly accessible blockchains are termed as Public Blockchain. These blockchains have no restrictions on the participatory and validator. The main advantage of this type of blockchain is the uncontrollability of the blockchain which means that nobody will have complete control over the network.
Hence it ensures that the data is secure and helps in the immutability of the records. All the nodes connected to this public blockchain will have equal authority, and hence, these public blockchain becomes fully distributed. Bitcoin, Ethereum, and Litecoin are some of the examples of Public Blockchain being used in real-world scenarios.
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2) Private Blockchain
As the name suggests, this particular blockchain requires the participants to be invited before they can be a part of the blockchain. Here all the transactions are visible only to persons who are part of the blockchain ecosystem. These types of blockchains are centralized and much better controlled than public blockchains.
As these blockchains are more centralized, they can be governed and regulated by someone who can make sure that the governors are guiding participants. These blockchains can have a token, or may not have one based on the preference of the Blockchain owner.
Private blockchains usually have a network administrator who can take care of the user permissions in case any particular user requires additional authority on the go. These are typically used in private organizations to store sensitive information about the organization.
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3) Consortium / Hybrid Blockchain
This blockchain is divided into two different types, where some nodes are private, while the other nodes are public. As a result, some of the nodes will be allowed to participate in the transactions. The other nodes are to control the consensus process. This is a hybrid blockchain between private and public blockchains.
Here all the nodes can access the blockchain, while the level of information that can be accessed will be based on the node accessing that particular data. In this blockchain, there are usually two types of users. One is the user who has all the controls over the blockchain and decides the level of security for a particular user, while rest others are the ones who just accesses the blockchain.
These are three different types of blockchains that currently exists.
Different Kinds of Blockchain
All the different types of blockchains are quite popular, let us have a look at the examples of different kinds of blockchains:
- Blockchain in Banking Sector
Out of all, bitcoin is the most popular cryptocurrency in the market. With Bitcoin, we can make payments to anyone online without involving any third party. For example, you need to transfer x amount of money to your friend, and you can send some bitcoins from your account to another using the Account ID of the recipient. Read more about Bitcoin here.
This particular transaction is then verified with the help of Blockchain mining, which in turn helps to avoid frauds in the transactions. Once the transaction is verified and validated from both ends, then it is successfully added to the blockchain, and the recipient gets the bitcoin.
Anyone can make a transaction on bitcoin and can be a validator, as there is no restriction on who can access it. Although all the data is available on the internet, it is still secure, as all information is encrypted, and this makes it the most reliable form of currency possible.
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This particular application of blockchain is used for providing enhanced security to the users. With the help of multichain, one can prevent all the type of unauthorized access to sensitive data. This is a private type of blockchain, which will only be available to authorized personnel of the organization.
This application will be a Private type where your financial information will be shared only with the board members, financial members, and the management of your organization. This not only makes Banking easy and secure, but also reliable. In this type of application, there can be n number of nodes over the internet. But only a few nodes will have access to the data. The Network Administrator governs all the access.
Even the Participant and Validator access are restricted to most of the data that is available in the blockchain. Usually, a single Multichain is used by only a single organization. Until now, in most cases, this particular type of blockchain is quite different from the one which is used in the Public Banking sector.
3) Blockchain in Banking Sector
When it comes to blockchain in the banking sector, where it will be of the hybrid type. As here, the data of the people must be public, so all the information can be shareable, but the access to the banking of blockchain must be available only to a single bank, and also to all the branches of the same bank.
In this type of application, the blockchain is linked with trusted nodes only, and the nodes must have access to the blockchain. Here the blockchain is shared and restricted to only the trusted nodes. Read more about the change blockchain brought to banking sector.
Difference between Blockchain & Cryptocurrency
The difference between blockchain and cryptocurrency is the same difference between your mobile application and your mobile platform. The app can be WhatsApp or Uber. While the platform can be iOS or Android, the application runs on the platform. In a similar tone, blockchain in the platform, while cryptocurrency is the application.
The confusion is quite common, as both cryptocurrency and blockchain were introduced at the same time with Bitcoin. Bitcoin was the first application of cryptocurrency on the blockchain platform.
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Let’s wrap up
These are some of the popular types of blockchain available today. There can be many more different types of applications available over the world based on blockchain. With increasing speed, network bandwidth and compute power, we are surely going to see blockchain being used in several different types of applications. We hope this article was able to shed some light of blockchain and different types of blockchain.
There is a rise in careers in blockchain technology and blockchain has tremendously changed the very face of the technology industry forever. If you’re interested to become a blockchain developer and build smart contracts and chaincodes, checkout IIIT-B & upGrad’s Advanced certificate program in blockchain technology.
What is a consensus process?
A central administrator can control and modify the data in any centralized system. Any modifications, such as adding, removing, or changing data, are conducted by a central authority solely responsible for keeping accurate records. A consensus process is a fault-tolerant method used within computer and blockchain systems to procure agreement across distributed systems or multi-agent networks, such as cryptocurrencies, on a specific data value or a single network configuration. It's handy for keeping track of items, among other things. Proof-of-Work (PoW) is the consensus process used in Blockchains, and it demands the use of processing power to solve a challenging but arbitrary problem in hopes of keeping all network nodes honest.
How is Blockchain used in day-to-day life?
There is a wide range of uses of Blockchain in day-to-day life. Blockchain is utilized to minimize cost and risk throughout the supply chain in supply chain management. It also makes the supply chain more transparent. It is used in the healthcare industry to keep track of patient information. The ledger technology permits the safe transmission of patient medical data and oversees the drug supply chain. The blockchain-based token-based system assures a system of one immutable vote per individual, resulting in a fair digital voting environment. Blockchain is used in the real estate industry to store ownership and title information, making it easier to transfer and trace ownership. Finally, it is utilized by the media to ensure data integrity, enable advertising companies to target the correct clients and ensure that musicians earn proper royalties for their original compositions.
What are the advantages of using Blockchain?
Blockchain's unique verification technique is one of its finest features. We can enhance accuracy by removing the need for human verification using Blockchain. By eliminating third-party verification, Blockchain has also helped to reduce costs. Its decentralized characteristic has made tampering with data incredibly difficult for hackers and invaders. Blockchain as a transaction mechanism has a number of advantages, including security, anonymity, and efficiency. Because it is a transparent technology, it also provides total transparency to its users. Additionally, Blockchain offers inhabitants of countries with unstable or undeveloped governments a financial option as well as a mechanism to safeguard personal information.