Understanding Blockchain for Business - Bitcoin versus the IBM Gifted Fabric
Blockchain: Everyone knows about Bitcoin, what is the fundamental difference between the Blockchain that IBM built and the Blockchain that underpins Bitcoin Technology? Both IBM’s Blockchain solution and Bitcoin’s solution implement a technology known as a distributed ledger. Today, if you must transfer money to someone else, you have to go through a bank. The Bank offers and maintains a “Centralized Ledger”. Bitcoin introduced the notion of a distributed ledger that will eliminate the need for banks. Bitcoin had to address the exposure of "spending the same coin twice". Usually, this double-spend exposure is solved by the “Central Ledger”. Bitcoin solved this consistency exposure by requiring all transactions to be executed on all nodes. This means if I want to send money to someone else, Bitcoin will provide a copy of this ledger to both parties and that transaction will occur on both ledgers. There are thousands of "nodes" participating in the Bitcoin Network; which node earns the right to submit their transactions for acceptance onto the ledger? Each node must solve a Compute Intensive "HASH" problem. Whoever solves this hash problem is the winner, and that winner will broadcast all of their transactions packaged as a Block to all the other Nodes and they will accept these transactions.
When you study the Blockchain that Bitcoin has implemented you see:
- The Bitcoin Blockchain allows anyone to join the network and anyone to leave the network – it is a Public Blockchain and known as a "permission-less network".
- Whoever joins this network will be obligated to solve this compute intensive HASH problem.
When you compare Bitcoin's Blockchain to the Blockchain provided by IBM, you see:
- Solving the Cryptographic Puzzle is one area that differentiates Bitcoins use of Blockchain Technology from the Open Block Chain Fabric (OBC Fabric) IBM gifted to the Linux Foundation Hyper Ledger Project.
- There is no compute intensive problem to solve,
- Instead IBM has offered up a plug-able consensus framework and primed this framework with two consensus algorithms.
- The second area is “the type of network”, Bitcoin is Public. The OBC Fabric is Private. This means only known, trusted parties are allowed to join this network.
My next blog post will explore how a Blockchain is created.