Blockchain was invented by Satoshi Nakamoto in 2008 to serve as the public transaction ledger of the cryptocurrency bitcoin.
The invention of the blockchain for bitcoin made it the first digital currency to solve the double-spending problem without the need of a trusted authority or central server.
There are many types of Blockchains: Public, Semi-Private, Private and Offchains emerged since then.
Brief description of the various blockchains are:-
Type I Public Blockchain
A public blockchain as its name suggests is the blockchain of the public, meaning a kind of blockchain which is-‘ for the people, by the people and of the people’ Here no one is in charge and anyone can participate in reading/writing/auditing the blockchain. Another thing is that these types of blockchain are open and transparent hence anyone can review anything at a given point of time on a public blockchain.
Example: Bitcoin, Litecoin, TIM, etc
Type II Semi-Private Blockchain It is a public permissioned blockchain. A central authority or cartel grants permissions to only some folks to read/write/verify transactions. Since write access is given to a trusted few, consensus is achieved in a simpler and more efficient way. Public read access is allowed to verify transaction records.
Example: Zilliqa, NEO, EOS, Stellar, Nano, Tolar, Patientory etc
Type III Private Blockchain A private blockchain is permissioned. It is a private property of an individual or an organization. Unlike public blockchain here, there is someone in charge. The administrator looks after important things such as read/write or whom to selectively give access to read or vice versa. Here the consensus is achieved on the whims of the central in-charge who can give mining rights to anyone or not give at all.
Example: Ripple, Hyperledger, Hashgraph, Bankchain, OpenChain etc
Type IIIA Consortium or Federated Blockchain This type of blockchain tries to remove the sole autonomy which gets vested in just one entity by using private blockchains. So here instead of one in charge, you have more than one in charge. Basically, you have a group of companies or representative individuals coming together and making decisions for the best benefit of the whole network. Such groups are also called consortiums or a federation that’s why the name consortium or federated blockchain.
Example: r3, EWF
Type IV Offchain An off-chain transaction is the movement of value outside of the block chain. While an on-chain transaction – usually referred to as simply ‘a transaction’ – modifies the blockchain and depends on the blockchain to determine its validity, an off-chain transaction relies on other methods to record and validate the transaction. Like on-chain transactions all parties must agree to accept the particular method by which the transaction occurs.
Example: Lightning, Plasma, ankr, Arego, hDapp
Offchain Rationale
On-chain transactions have disadvantages that make them unsuitable for some applications:
Speed On-chain transactions take some time to accumulate enough confirmations to ensure that they can-not be reversed. Off-chain transaction systems can record that a transaction has happened immediately, and, subject to the guarantees of the system itself, immediately guarantee it won’t be reversed.
Privacy/Anonymity All on-chain transactions are recorded publicly on the block chain; Bitcoin transactions are not inherently anonymous. It may be possible for a third-party to use the block chain transaction data to determine the source and/or destination of a transaction if they can gather enough information linking addresses to identities. Because off-chain transactions do not happen on the block chain they need not be public.
Cost/Scalability Miners usually charge fees to confirm a transaction. While currently the demand for transactions is sufficiently low that fees are relatively small, and transactions can often be confirmed for free, for many applications even paying a few cents per transaction is unaffordable. In addition Bitcoin currently has a limit of 7 transactions per second, the blocksize limit. This limit is related to the scalability of the system as a whole, and one option to achieve higher transaction volumes is to keep the blocksize limit as is and use off-chain transactions for lower-value transactions; with higher volumes fees for transactions done on-chain will rise due to supply and demand.
Notes:-
Most cryptocurrency enthusiasts may know Bitcoin and Ethereum in Public Blockchain.
TIM, it stands for The Internet Of Money may be new to many. TIM and it’s offchain solution hDapp are designed for performance, stability and sustainability.
Any company/institution thinking of jumping onto the blockchain wagon, should ponder whether there is a real beneficial need of implementing it. In addition, to tap the most out of blockchain, there are fitness factors to consider, namely,
- Size of users matter. More participants, more beneficial and cost effective to use blockchain
- Same business database but access by multiple users with various complex needs and rights
- Longevity of trusted business record keeping is paramount
- Real time transfer of assets or payments are demanded from the business operation