In its simplest meaning, Blockchain is a technology construed under two principles:
Decentralization and Distribution.
Decentralization networks are not exactly new, as we have seen the World Wide Web since its inception. The creator of www, Tim Berners-Lee, has pointed out the Distribution as the most important characteristic of Blockchain networks. The peer-to-peer factor combined with the decentralization brings to Blockchain its majors benefits. As a decentralized ledger, the information is maintained across a network of unrelated servers called “nodes”. The ledger contains a chain of records of all transactions which are grouped in blocks.
The information goes in blocks and each one brings this data:
1. the hash of the previous block;
2. time stamping;
3. a summary of the transaction included;
4. the Proof of Work from the creating of the secure block.
When Blockchain was first introduced to the world, in 2008, via Satoshi Nakamoto White Paper – Bitcoin: A Peer-to-Peer Electronic Cash System (until the date I write this article, the identity of Mr. Sakamoto remains uncertain), it hadn’t become immediately popular. Since then, Blockchain has become one of the most talked issues in technology scene.
We are at the origin of the experiments of this technology with a real potential to modify the way in which we live today. An important point that I have not seen much in evidence is the way in which Blockchain configuration can be used to meet specific application needs.
Leaving aside all the hype, we have basically three ways of using Blockchain:
Public, Consortium, and Private.
This model is the one that normally defines Blockchain, where the cryptocurrencies go and are the original decentralized ledger structure. Public Blockchain receives and sends any digital transaction form anybody in the whole world, and this transaction can be audited by anybody in the world too. It is called “permissionless” network.
Before any transaction on Blockchain is considered valid, it must be authorized by the constituent previous node of the chain process. After this validation in regards to the specifications protocols, the transaction is validated and added to the chain.
So, the open-source-like process makes the Public Blockchain transactions transparent and secure, and this transparency is what brought all the buzz to the crypto assets exchange community and is frequently confused with Bitcoin itself.
Although transparent and decentralized as is, Blockchain is not 100% unhackable. As a network, it has good and bad actors, and as technology expands failures start to be more exploited.
A Consortium Blockchain is part public and part private. The consensus process is controlled by a pre-selected group of nodes, by the consortium, but other nodes can be part of the chain. The protocols directed to outside nodes are determined by the consortium, which means the power of authorization and auditing transactions, creation of new transactions, etc.
In Private Blockchains, only pre-chosen entities have “write permission” – the ability to create new transactions on the chain. So, Private Blockchain is a closed network with the same benefits of open networks but the characteristics of decentralization and distribution are minimized. Private Blockchain brings control to its constituents.
The corporate use of a Private Blockchain can be very well suited to increase business processes, providing the benefits of the chain in exchange for internal information on a controlled proprietary system. When the information that goes through the network is sensible or private, it is directed only to authorized parties, which have the permissions to do so under the configuration protocols of the Blockchain. Besides, to change the cryptographic method that rules the consensus process is fast and easier to do that on a private chain than a consortium or public network.
The Blockchain is in its infancy.
Drawbacks will appear as in any kind of technology, but its benefits are already around.