How is data confirmed into a blockchain and why is that data trusted?
Remember a blockchain is a network made up of ‘nodes’ (a computer or device with a microprocessor). Across that network of nodes, a common, synchronised, identical set of data is guaranteed. The process used to validate and ‘lock down’ that data into a block is called ‘consensus’.
There are different mechanisms used to achieve this agreed ‘state’ across the parties in the network. In a public, open blockchain (eg Bitcoin, Ethereum) a reward is paid to the node that proves that agreed state first and broadcasts it across the network. That reward is some kind of ‘value’ generated by the blockchain (eg. Cryptocurrency ‘coins’ or whatever ‘token’ is used as fuel or equity in the particular blockchain).
In a private, permissioned blockchain (eg Hyperledger), data is validated using non-financial mechanisms. So private blockchains are not consented with a token or coin generated. Rather the data is agreed by a certain number of ‘authorised’ nodes.
We can see that the incentive to reach agreed ‘state’ in a public blockchain is economic, while the incentive to reach a synchronised, validated view of data in a private (usually enterprise) blockchain is common trust and utility. Any node attempting to corrupt data will be invalidated.
Kris Vette is an Emerging Technology Strategist. He runs Chain Ecosystems, a consultancy that enables organisations to both understand and posture themselves for success in the age of networks.
