Blockchain technology is a decentralized system that allows for secure and transparent transactions without the need for intermediaries. It was first introduced in 2008 as the underlying technology behind Bitcoin, but its potential applications go far beyond cryptocurrency. In this article, we will explore the different types of blockchain that exist today and their unique characteristics.
Public vs Private Blockchains
The two main categories of blockchain are public and private. Public blockchains are open to anyone who wants to participate and are typically used for cryptocurrency or other decentralized applications. They are maintained by a network of nodes and rely on consensus mechanisms such as proof-of-work (PoW) or proof-of-stake (PoS) to validate transactions. Examples of public blockchains include Bitcoin, Ethereum, and Ripple.
On the other hand, private blockchains are restricted to a specific group of participants who have been granted permission to join. They are often used for enterprise applications or supply chain management. Private blockchains can be maintained by a single entity or a group of entities, and they can use various consensus mechanisms such as delegated proof-of-stake (DPoS) or hybrid models that combine PoW and PoS. Examples of private blockchains include IBM’s Food Trust and Walmart’s Global Food Traceability System.
Permissioned vs Permissionless Blockchains
Another way to categorize blockchain is by permissioned vs permissionless. Permissioned blockchains require participants to be granted permission before they can join the network, while permissionless blockchains are open to anyone who wants to participate.
Public blockchains, as mentioned earlier, are typically permissionless. However, there are also some private blockchains that can be permissionless, such as Hyperledger Fabric, which allows for both permissioned and permissionless participation.
Consensus Mechanisms: PoW vs PoS vs DPoS vs Hybrid Models
Consensus mechanisms are the algorithms that govern how nodes in a blockchain network validate transactions and agree on the state of the ledger. There are several types of consensus mechanisms, including proof-of-work (PoW), proof-of-stake (PoS), delegated proof-of-stake (DPoS), and hybrid models that combine PoW and PoS.
PoW is the most widely used consensus mechanism in public blockchains such as Bitcoin and Ethereum. It requires nodes to solve complex mathematical problems to validate transactions and add them to the blockchain. This process consumes a significant amount of energy, making it less environmentally friendly than other consensus mechanisms.
PoS, on the other hand, is used in private blockchains such as IBM’s Food Trust and Walmart’s Global Food Traceability System. It requires nodes to hold a certain amount of cryptocurrency or tokens as proof of stake before they can participate in the validation process. This mechanism is more energy-efficient than PoW but still relies on a centralized entity to validate transactions.
DPoS is used in some private blockchains such as Hyperledger Fabric. It allows nodes to delegate their validation power to other nodes, which reduces the computational load and makes the network more efficient. DPoS is also known for its fast transaction speeds and low fees.
Finally, hybrid models combine different consensus mechanisms to achieve a balance between security, efficiency, and scalability. One example of a hybrid model is Ethereum’s proof-of-authority (PoA) consensus mechanism, which allows for faster transaction processing but requires centralized validation from trusted nodes.
Case Study: Blockchain in Healthcare
Blockchain technology has the potential to revolutionize healthcare by improving data security, privacy, and interoperability. One example of a blockchain-based healthcare application is MediLedger, which was developed by the Drug Industry Distributors Association (DiDA) and launched in 2018.
MediLedger uses a private blockchain to securely track and verify drug transactions from manufacturer to patient. This allows for greater transparency and accountability in the supply chain, reducing the risk of counterfeit drugs and diversion. The network is maintained by a group of pharmaceutical companies and relies on a DPoS consensus mechanism.