This infographic outlines the components of blockchain and the role governance can play in making this technology mainstream.
Host to a technology that promises transparency and security in a decentralized model, the blockchain industry is working towards linking corporations, industries and governments. However, there is still extensive work to be done in developing implementable solutions.
In implementing blockchain, organizations need to be conscious of potential challenges around scalability, privacy and how well their blockchain can interact with others. With these concerns addressed early on through the implementation of good governance practices, a blockchain can be strategically positioned against competitors in the market.
There are four types of blockchains: federated, permissioned or private, permissionless or public and hybrid. Each of these implement varying degrees of access, privacy, scalability and uses. Governance models within these blockchains address three key components of a blockchain network.
First are nodes, powerful computers that host copies of the ledger, validate each transaction and protect the integrity of the blockchain by keeping it decentralized. Second come miners, nodes that are compensated for grouping transactions and adding them to the blockchain. The third area of interest is the delegated proof of stake, a process in which all nodes vote to elect the nodes most trusted to validate transactions on their behalf, making the blockchain more efficient and more secure. These elected nodes can be replaced at any point in time as voting is ongoing.
Focused on increasing transparency and cutting out the middleman, governance models include decentralized autonomous organizations (DAO), which use smart contracts to auto-complete business decisions, and decentralized applications (dApps), where users are rewarded with tokens for validating transactions. These solutions can also help address the scalability issue. Despite being a groundbreaking innovation, cryptocurrency transactions still face scalability challenges due to the time constraints of consensus validation of each transaction. By further decentralizing these networks, there is an opportunity to help the technology go mainstream.
Infographic courtesy of Visual Capitalist.