Blockchain: Comprehensive Review

February 21, 2019

Written by Mussie Legesse, Creative Lead at Xeddy

Edited by Basil Udo, Co-Founder at Xeddy

When understanding something new, it is helpful to start with a familiar concept as a framework and identify any differences. So, in that fashion, a practical and familiar framework to aid in understanding blockchain is to think of it as a digital database shared among a group of individuals. A database is a collection of organized information or data. However, it is important to mention that blockchain is different from traditional databases, and it is in these differences that the magic of blockchain resides. One difference stems from the disbursement of the database. The blockchain is distributed among a group of individuals, and all individuals in the group have access to identical copies of the blockchain. Another major difference is in the organization. The data of interest is organized in chunks called blocks; these blocks are time-stamped and chained together. If it is not yet apparent, the name blockchain is derived from the method of data organization. Put simply, a good operational definition of blockchain would be a distributed digital database organized in chunks called blocks that are time-stamped and chained together.

To better understand the magic of blockchain, it is also necessary to have a deeper look at the nature of its anatomy. To make the anatomy more digestible, it is helpful to break it down into three parts: block, block time, and chain. As previously defined, a block is a chunk of data that is grouped together. However, a block also contains a hash, an identifier unique to the block, along with the previous block’s hash. Block time is the average temporal length it takes for the network to generate a new block. This can vary based on the blockchain workload and congestion. For Ethereum, the block time is 14–15 seconds on average, but it is about 10 minutes for bitcoin. A chain is a sequence of blocks linked together across time, where a new block is generated and linked depending on the specified time of creation.

Decentralization is one of the core pillars of blockchain. The idea behind decentralization is to distribute the decision-making power among the blockchain participants. So, each node or participant is trusted and valued equally. The purpose is to eliminate the risk of storing data by a central authority or figure. The primary risks of centralized networks are their vulnerability to computer hackers and central points of failure. However, in a decentralized system, there is the risk of a central authority gaining control over 51% of the nodes in the network and manipulating the blockchain to their liking.

Although decentralization is a core pillar of blockchain, it does not seem to be an inherent feature. It is a controversial topic in the blockchain discussion with two varying opinions. One side claims that blockchain must be open to the public and decentralized. This aligns with the belief that private systems requiring users to be authorized by a central system should not be considered a blockchain. On the opposite end of the spectrum, blockchain is considered a data structure that clumps information in time-stamped blocks. According to this claim, the presence of decentralization does not make or break a blockchain’s existence.

Below are different types of blockchains. It is essential to mention the descriptions may not fully capture the complexities of each type. Nevertheless, these definitions serve as a general overview of each blockchain.

  • Public Blockchain: On these chains, all public users can access them with a stable internet connection. These networks offer economic incentives for their participants and utilize the Proof of Stake or Proof of Work algorithm for consensus.
  • Private Blockchain: Network administrators must permit users to access this network. In addition, certain participants have access restrictions. The difference between private and public blockchains is that a private blockchain is centralized.
  • Hybrid Blockchain: As the name suggests, a hybrid blockchain has features that belong to centralized and decentralized systems. Depending on the combination’s proportional breakdown, the chain’s exact workings can vary.
  • Sidechain: These are chains that run parallel to a primary blockchain. Sidechains operate independently from the primary blockchain and are also linked to the primary chain. Examples of sidechains include Plasma, Alpha, and Liquid.
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