BLOCKCHAINS - OVERVIEW, FEATURES, STRUCTURE, PART 2 OF 2
By: Peter Chipkin
Article Contents
- Do you need permission to join a chain?
- Consensus Models (Proof of …)
- Proof of Work
- Proof of Stake
- Proof of Activity
- Proof of Burn
- Proof of Capacity
- Proof of Elapsed Time
- Scalability vs Performance
- Blockchain as a Service
- Blockchain Forks
- Glossary
Do You Need Permission to Join a Chain?
A permissioned blockchain restricts the actors who can contribute to system consensus. Only approved participants can validate transactions and, in some cases, deploy smart contracts.
A permissionless blockchain allows anyone to join the network, participate in block validation, and create smart contracts. Bitcoin and Ethereum are well-known permissionless blockchains.
Permissioned-on-permissionless systems attempt to combine both models but often inherit the disadvantages of each without realizing their benefits.
Key characteristics of permissionless blockchains:
- No authentication is required to join
- Nodes may join or leave at any time
- The total number of participants is unknown
- Participation fluctuates over time
A Sybil attack exploits the inability to verify whether network participants represent distinct physical entities. Traditional identity systems (certificates, IP addresses, passwords) are insufficient due to impersonation and shared credentials.
Consensus Models (Proof of …)
Proof of Work
Miners compete to solve cryptographic puzzles to add the next block. The first successful miner earns block rewards and transaction fees. Proof of Work ensures a single authoritative blockchain and resists adversarial forks.
Proof of Stake
Validators stake existing coins instead of expending computational power. There is no mining; validators earn transaction fees proportional to their stake.
Proof of Activity
A hybrid model combining Proof of Work and Proof of Stake to mitigate long-term security risks once block rewards diminish.
Proof of Burn
Participants irreversibly destroy coins to earn mining privileges. Critics argue this still wastes resources and favors wealth concentration.
Proof of Capacity
Mining capability is based on available disk space rather than computation. Burstcoin is a notable implementation.
Proof of Elapsed Time
Developed by Intel, this model uses trusted execution environments (such as SGX) to randomly select block producers with minimal energy use.
Scalability vs Performance
Blockchain as a Service (BaaS)
Blockchain refers to decentralized, trustless ledgers like Bitcoin and Ethereum. Blockchain as a Service, by contrast, provides managed infrastructure for developing blockchain-based applications.
Vendors such as Microsoft and IBM offer BaaS platforms similar to cloud computing services. These may support public or private (permissioned) blockchains.
Critics argue that BaaS reintroduces trusted intermediaries, undermining the core principles of decentralization.
How Blockchains Work – Visual Overview
Blockchain Forks
Forks occur when a blockchain diverges due to competing blocks or intentional rule changes. Governance determines which chain survives.
Types of Forks
Soft Fork: Backward-compatible rule changes where old nodes remain valid.
Hard Fork: Non-backward-compatible changes creating two separate blockchains.
User-Activated Soft Fork (UASF): Upgrades initiated by users rather than miners.
What Happens When a Fork Occurs?
Two blockchains emerge with a shared history up to the fork point. Both may persist if supported by miners and developers.
Who Controls Fork Decisions?
Although core developers maintain reference implementations, the network ultimately decides which rules to follow by adopting compatible software.
How to Avoid Blockchain Forks
Using vendor-controlled permissioned blockchains avoids forks but sacrifices decentralization.
