Blockchain might be the technology that redefines the way distributed databases work. News talking about it hit the headlines every day, and there are a lot of articles and videos explaining better or worse how it works. The reasons why I think this article may be interesting for you are the following:

  1. Most articles don’t talk about the other types of blockchains that are currently populating the internet and coming up in many conversations between CEOs. These are the private/federated ones. Below you will find answers to what these are, and how they are different from public blockchain networks (like Bitcoin or Ethereum).

When was Blockchain Born?

Let’s start from the beginning. Since the Internet was created, there have been many attempts to create a secure online payment method. These gave birth to the idea of a virtual currency. The key for its success was offered to the world by S. Habber y W.S. Stornetta in 1991. This “key” is nothing less than the blockchain, a clever and quite simple idea that makes it possible for untrusted (and even anonymous!) people to agree on sharing and storing information (like monetary transactions).

What is Blockchain?

Let’s define first what is the original blockchain’s architecture. Blockchains have since evolved into other structures which we will talk about later, identifying different types and their respective characteristics.

How does Blockchain Work and How is Everything Validated?

Step 1: When a node wants to perform a transaction (send money, deploy a smart contract, …) it sends this information to its node-friends. Each node checks some basic things first (for instance if the money has not been spent before).

Hash Functions and Hash numbers

All the blocks are provided with an alphanumeric code/number called hash. To get a hash, you have to concatenate all the information of the block (the number, the transactions inside, the signature of the endorser, …) with another code called nonce. The hash is the result of applying a hash function (a function with specific mathematical properties, useful for the security of the chain) to this concatenation. Not any hash is valid, but it must begin with a determined number of zeros (depending on the blockchain). The strategy to find a valid hash is trying with different nonces until you find a valid hash. One of the properties of the hash functions is that there is no better strategy than trying random nonces.

Schema illustrating hash functions and hash numbers.
Changing anything in a block will not only make that block invalid, but all the following ones too.

Consensus Protocol

The consensus protocol is the method by which a node is selected to propose a new block. The idea is for the trusted nodes to have more chances to win the toss. Let’s explain the two most commonly used:

Types of Blockchain

So far we have understood how the public cryptocurrencies work and why are they so interesting. Now it’s time to review some of the different types of blockchain and their variations.

Some of the current types of blockchains.

The Reality about Private/Federated Networks

To wrap up this long article, let’s go through some insights about the business of blockchain.

Physicist working on blockchain, quantum, and self-sovereifn identity. Trying to make them more accessible and understandable.

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