9 Shades of Blockchain

What makes or breaks a blockchain?

bitHolla Team
Apr 2, 2019 · 6 min read

Databases. Blockchain. Bitcoin.

Definitions overlap. Characteristics get mixed up. The confusion between them has fostered a cottage industry to scam newcomers.

But, the original blockchain, aka the Bitcoin blockchain, is no scam. Far from perfect, it is, in fact, slow and expensive to run. Such is the cost of an autonomous blockchain without a corporation or government behind it.

From the most autonomous to the least, let’s slide down the Blockchain Spectrum.

Blockchains (Green)

1st level: Bitcoin

Example: the Bitcoin Blockchain.

Pros: The only chain that expanded organically, the Bitcoin blockchain is likely to remain a unique monetary phenomenon.

Cons: The autonomous expansion comes at a high cost in price, energy and speed.

2nd level: Emerging blockchains

Example: Although chronically struggling to scale, Ethereum is the go-to developer blockchain for apps and especially smart contracts.

Many dApps have their activity faked by bots transacting between themselves.

Pros: Many of these blockchain combine increasingly liquid markets with developer-friendly communities.

Cons: With lower hash-power, these chains are more vulnerable to both hard forks and 51% hacks. Moreover, since their code requires constant upkeep, they need central planning to survive.

3rd level: Semi-blockchains

Top coins on Coinmarketcap circa July 2014: half of them are dead, re-branded and knocked far down the list.

Example: As of January, the NEM foundation has kindly asked the public for a rescue package for its blockchain.

Pros: Free from decentralized consensus, they are faster and more efficient than public chains for managing transactions.

Cons: Arguably, they pass off as public blockchains to elude the legal framework and dodge inquiries from regulators. But they’ll have to clarify their stance eventually.

Central Blockchains (White)

4th level: Central blockchains backed by a company

Example: Ripple is the model for all centralized, corporate blockchains.

Pros: Swifter than most, central blockchains are great at syncing with semi-corporate business models.

Cons: Albeit more transparent than a typical bank, the state of the Ripple blockchain is still highly dependent on the Ripple Labs company: any XRP transaction can be reneged on at any time with little recourse for users. Moreover, besides raising funds for Ripple labs, the XRP token has very few other use case.

5th level: Central blockchains backed by a company and the USD

Example: Although a work in progress, Tether is considered a highly successful stablecoin.

Pros: Created to dull crypto’s volatility, pegged coins mitigate the default risk. Thanks to their reasonable fungibility and stability, much needed liquidity was injected into the crypto markets.

Cons: Centralized, these stablecoins are sensitive to pressure on their company. Lacking a clear way to cash out, many exchanges listing USDT nickel-and-dime traders on spreads and fees.

6th level: Central blockchains backed by a banking establishment

Example: Allegedly the world’s first regulated stablecoin, Gemini’s GUSD is the only NYDFS-supervised (New York Department of Financial Services), State Street-backed, dollar-pegged cryptocurrency today.

The newest player on the block, J.P. Morgan have just announced the release of their own crypto stablecoin: JPM Coin. Rival to XRP, that coin is planned to be used for inter-bank settlements currently handled by SWIFT messages.

Pros: More regulated, stablecoins tend to be accepted by other regulated corporations. Albeit recent, these companies are paving the way toward an attractive, fiat-backed stablecoin market.

Cons: Accepted on a select few networks & exchanges, these highly regulated tokens are difficult to trade and even harder to cash out.

Closed Blockchains aka databases (Blue)

7th level: Experimental Distributed Database

Another chief leaves: CEO Blythe Masters has stepped down in December, marking another CTO departure from Digital Assets.

Example: Leaders of the “blockchain, not Bicoin” trend, Digital Assets and R3 Corda now prefer the word “DLT” (“Distributed Ledger Technology”) over “blockchain”. Aiming to modernize legacy processes, they tailor ledger solutions to systems overdue for an upgrade.

Pros: Distributed ledgers are configured to facilitate self-auditing, compliance requirements and model reconciliation.

Cons: With very few use cases outside of their own corporation, these untried, experimental databases often encounter issues.

8th level: Corporate Databases

Examples: The most famous examples, Visa, MasterCard and PayPal had to build their networks on top of banks’.

Pros: Thanks to extremely fast and consistent service, these companies offer a sense of familiarity.

Cons: Often region-locked, fintech startups exhibit the same limitations in practices and curbed expansion than the banking network they are built upon.

9th level: National Database

Example: Central banks and government have databases.

Pros: Centralized services can offer stability in times of economic turmoil.

Cons: In charge of implementing its economic policy, central banks are completely aligned with their government. Best case scenario, central banks become too-big-to-fail entities. Worse case scenario, they follow doubtful directions.

Conclusion

Private chains, just like the private intranets of the early 2000s, are likely to fade out in favor of global, public counterparts. While small transactions will likely be carried out via banking networks for the foreseeable future, maybe a few chains — Ethereum? — could reach escape velocity from central planning.

A true blockchain is an autonomous one. Once born, it requires minimum human input to keep the blocks flowing. Our 9 Shades of Blockchains show that while a ton of tech falls under the designation today, there is only one true blockchain. However advanced, other blockchains are merely attempts to replicate the singularity of the original blockchain.

Try after try, it is dawning that recreating the Bitcoin blockchain is like trying to recreate the big bang. It only happens once.

For more crypto industry and bitHolla news, check us out on Facebook, Twitter, LinkedIn and our website!

bitHolla

Future-proofing finance through white-label crypto exchange software, wallets & coin creation tool.

Sign up for bitHolla crypto industry news

By bitHolla

All things crypto business from exchange technology, trading and big picture crypto industry thoughts and opinions. Take a look.

By signing up, you will create a Medium account if you don’t already have one. Review our Privacy Policy for more information about our privacy practices.

Check your inbox
Medium sent you an email at to complete your subscription.

bitHolla Team

Written by

bitHolla

bitHolla

✅bitHolla provides the easiest-to-use white-label crypto exchange software called HollaEx Kit. The kit provides all the tools needed to make a crypto service such as an exchange, wallet, and other crypto financial services. Set up your crypto platform free & connect your website.

bitHolla Team

Written by

bitHolla

bitHolla

✅bitHolla provides the easiest-to-use white-label crypto exchange software called HollaEx Kit. The kit provides all the tools needed to make a crypto service such as an exchange, wallet, and other crypto financial services. Set up your crypto platform free & connect your website.

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store