In this article, we will explore what blockchain is and its two main principles of decentralization and immutability. We will also discuss the different types of blockchains, private and public, and the various consensus algorithms used by different blockchain networks. Finally, we will examine Attributes™ platform and why it uses blockchain technology and the Proof of Authority consensus algorithm.
Defining Blockchain
- Blockchain is a decentralized and distributed digital ledger of transactions.
- It is open for anyone to read and access for free.
- Information recorded in the blockchain is timestamped and immutable, meaning it cannot be modified or deleted.
Focus on the 2 key principles of Blockchain
To understand why blockchain is used as a trustworthy technology for many applications, it’s helpful to examine its two basic principles:
- Decentralization: the digital ledger is not owned or managed by a single entity, but rather by a network of stakeholders who can communicate without the use of a central server. Because all network participants can have a copy of the ledger, it becomes more robust to face attacks, fraud, etc., creating more trust in the ecosystem.
- Immutability: the blockchain consists of blocks of transactions stacked on top of each other, with each block containing a digital footprint of all the previous blocks. This ensures that once a block is added to the stack, it cannot be changed. These two principles help to understand how blockchain technology allows for the secure recording and transferring of data without the need for intermediaries.
Private & Public Blockchain
There are two types of blockchains:
- Public blockchain: anyone can join the network, add information, and transactions are public.
- Private blockchain: only specific stakeholders can be invited to participate and must have permission to read, write, or audit the blockchain.
Consensus algorithms
Each blockchain, whether it is public or private, must define a protocol called a consensus algorithm. This is an agreed-upon methodology that allows the network to reach a collective agreement on whether a transaction should be implemented or not. There are various consensus algorithms, including:
- Proof of Work: a process in which nodes must solve a complex mathematical puzzle in order to mine the next block. Bitcoin is based on blockchain technology that relies on the Proof of Work protocol.
- Proof of Stake: a method in which users must prove ownership of a certain amount of currency by locking up some of their coins as stake. A validator is chosen to generate a new block based on their economic stake in the network. Ethereum recently switched from a Proof of Work consensus to a Proof of Stake consensus.
- Proof of Authority: a consensus algorithm in which identity and reputation are valued instead of cryptographic assets (as in Proof of Stake) or computational power (as in Proof of Work). Validators in a Proof of Authority consensus are pre-identified and must meet certain conditions proving their long-term commitment to maintaining the blockchain. The type of consensus algorithm used depends on the needs of the particular blockchain network.
Focus on Attributes: why use Blockchain and which protocol was selected?
Attributes™ platform is based on Blockchain technology, allowing to guarantee the validity of the data and ensure, that certificates issued into the network are not sold several times (no double counting) . Attributes™ uses a public Blockchain platform with Proof of Authority consensus. One big advantage of this consensus is the fact that it does not require much energy to function.
