The Blockchain Terminology — Simplified
With the advent of every technology, comes certain terminologies linked to it. The new age Blockchain Technology has several terms associated to it, which we have simplified for you.
Decentralized Distributed Ledger Technology (DDLT)
A distributed ledger is a shared database that exists with multiple parties at the same time across several locations. Decentralization of this distributed ledger eliminates the need of a central authority to govern the validation and authentication of the exchanged data or asset. Decentralizing distributed ledger hence eliminates ‘single point of failure’.
It is important to note that Blockchain is a subset of DDLT and not vice versa.
Cryptographic Hash
Cryptography is to construct and analyze protocols that prevent third parties or the public from reading private messages. It enable secure communication. Blockchain technology utilizes cryptography as a means of protecting the identities of users, ensuring transactions are done safely and securing all information and storages of value.
Hashing in simple terms is taking an input of any length returning an output of a fixed length. This solves the complexity of remembering huge amount of shared information by instead remembering the hash generated to keep track.
Cryptographic Hash is a special class of hash function with deterministic properties which enable quick computation. There are other significant benefits in technical aspects.
Smart Contracts
Smarts contracts otherwise called self executing contracts are contracts which can be converted as computer codes. In blockchain, these smart contracts can be incorporated in a network for the entire network participants to adhere to it thereby eliminating any need of governing body. First proposed in 1994, these smart contracts not only maintain the agreement but also enforce the obligations in the network deployed.
The aim of smart contracts is to provide security that is superior to traditional contract law and to reduce other transaction costs associated with contracting.
Protocols
A protocol is a set of predetermined set of functions or say a set of rules that govern the ecosystem it is deployed in. In blockchain, Protocols act as a set of rules and guidelines to enable desired ecosystem on top of which decentralized application can be created and deployed.
Protocol level coins are ones which have their own custom made blockchain. Few examples being, Ethereum, Neo, Qtum among others.
Public & Private Blockchain Networks
The difference between a public blockchain network and a private blockchain network is that the former allows and encourages everyone and anyone to participate in the network following which the participants have an integral role in consensus mechanism. This consumes substantial amount of computational power as each participant or node authenticates the exchanged data. Blockchain is a classic example of open Blockchain Networks.
Private Networks run permissioning to enrol a new participant in a network and has various use applications.Private networks are designed to meet enterprise requirements in incorporating blockchain.
Consensus
Consensus Mechanism is blockchain is a mechanism to reach to an agreement in the network by validating and authenticating the underlying exchange of data.
In centralized system the consensus is the governing body of that particular system that authenticates the genuineness of data stored or transferred.
In decentralized system — Blockchain, the consensus becomes all the network participants in that particular network. This all important task of validating and authenticating the legitimacy of data exchanged and stored is decided by any of the two consensus mechanism adopted in that particular network. A consensus mechanism is a set of rules that decides on the contribution by the various network participants of the blockchain.
The two consensus mechanism as of now are Proof of Work and Proof of Stake.
Proof Of Work is a consensus protocol where the all the network participants compete to solve complex expensive computer calculations which is referred to as mining. The network participants mining new blocks are referred to as miners. On completion of the mining process, the first miner who successfully mines the block is rewarded with the currency of that network as defined by the protocol. This type of consensus mechanism require large computation power and hence large electric consumption and is time taking.
Proof of Stake serves the same purpose as that of Proof of Work, which is to reach to a consensus, but in a different way. Here, creator of a new block is chosen in a deterministic way, depending on its wealth, also defined as stake. The currency reward is eliminated and the total currency in the entire system is fixed (as it is created as a one-time process only). The miners are referred to as forgers as there is no currency reward on the new block creation. The forgers take the transaction fees instead.
Having an in-depth understanding of Blockchain Technology will keep you updated with the current technology trends in the world and will empower your career growth.
There are several online and offline courses Blockchain Lab India offers in collaboration with top institutes to help you enhance your grip on this new-age technology.
The Executive Blockchain Program is a stand-out course on Blockchain where candidates will be trained on the real world implementation of Blockchain enabled solutions.
