What actually is the Distributed ledger technology also known as Blockchain technology and what types of blockchains are exist? Lets figure out in this issue.
DLT refers to a novel and fast-evolving approach to recording and sharing data across multiple data stores (ledgers), which each have the exact same data records and are collectively maintained and controlled by a distributed network of computer servers, which are called nodes.
One way to think about DLT is that it is simply a distributed database with certain specific properties. Blockchain, a particulartype of DLT, uses cryptographic and algorithmic methods to create and verify acontinuously growing, append-only data structure that takes the form of a chain of socalled‘transaction blocks’ — the blockchain — which serves the function of a ledger. New additions to the database are initiated by one of the members (nodes), who creates a new “block” of data, for example containing several transaction records. Information about this new data block is then shared across the entire network, containing encrypted data so transaction details are not made public, and all network participants collectively determine the block’s validity according to a pre-defined algorithmic validation method (‘consensus mechanism’). Only after validation, all participants add the new block to their respective ledgers. Through this mechanism each change to the ledger is replicated across the entire network and each network member has a full, identical copy of the entire ledger at any point in time. Blockchain-based DLT, which was first applied as the underlying technology of the cryptocurrency Bitcoin, has a variety of potential applications beyond the narrow realm of digital currencies and cryptocurrencies. For instance, DLT could have applications in cross-border payments, financial markets infrastructure in the securities markets, and in collateral registries. The Bitcoin White Paper was published by Satoshi Nakamoto in 2008; the first Bitcoin block got mined in 2009. Since the Bitcoin protocol is open source, anyone could take the protocol, fork it (modify the code), and start their own version of P2P money.
But potential applications of DLT are not limited to the financial sector. DLT is currently being explored to facilitate digital identity products (such as national ID, birth, marriage and death records) or build tamper-proof, decentralized records of flow of commodities and materials across a supply chain by using trusted stakeholders to validate flows and movements.
Types of Blockchain
Anyone in the world can download the data and read the data. Anyone can participate in the consensus process to write the data or block into the public Blockchain. There are numerous public blockchains. Bitcoin which is a peer to peer currency exchange was the first public Blockchain followed by Ethereum which allows anyone to build smart contracts and decentralized apps on it. Some other examples are Dash and Lisk. It is highly secured using cryptography and consensus protocol.
Examples — Bitcoin, Ethereum, Dash.
Consortium Blockchain as the name suggests is controlled by a consortium of members. It has pre- defined set of nodes, the users with access to write the data or block. For example in the case of Trade Finance use case, the consortium may be participating banks, importer, exporter, ports of sending and receiving countries, custom officials etc. Some of these participants will have write access and some or all will have read access. It is not fully decentralized as public blockchain.
Examples — Ripple and R3.
In Private Blockchain, all permissions are kept centralized to an organization. Companies who wanted to create own currencies started using this type of Blockchain. One major criticism of Private Blockchain is that since it is not decentralized, it’s just a distributed database. There are some points in favor of this approach. One it allows some organizations who have compliance and privacy requirements to implement Blockchain. Second, it adds the values like cryptographic auditing and known identities to the internal processes. But with private Blockchain, the central idea and beauty of decentralization and open protocols gets lost.
Examples — Multichain, Blockstack.
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