Blockchain has seen a meteoric rise in popularity, resulting in unprecedented interest in using this technology. However, the issue that must be asked is whether or not all Blockchain companies have the same criteria. There are different types of blockchains available these days, and some of them are highly famous!
The correct response is not! Every company has specific needs which call for a separate Blockchain.
Different iterations of the blockchain technology, each with unique properties, are called “Types of Blockchain.” During this guide, we will investigate and better understand these varieties.
What Are the Different Kinds of Blockchains?
Private and public blockchains are the two primary classifications of this distributed ledger technology.
Nevertheless, several distinct variants exist, such as Consortium and Hybrid blockchains. Let’s start by figuring out what characteristics they all have in common before delving into the specifics of the various blockchain implementations.
Each blockchain is made up of a group of nodes that collaborate via the use of a peer-to-peer (P2P) network.
Every node in a network has its copy of the shared ledger, which is constantly updated. Each node can create blocks, verify transactions, start or receive, and initiate transactions.
Now that we’ve covered the basics of blockchains, let’s look at the four different ways they may be implemented.
Public Blockchain:
The initial kind of blockchain technology is the public blockchain. It is where cryptocurrencies such as Bitcoin were first created, contributing to the widespread use of distributed ledger technology (DLT).
It eliminates the issues from centralization, including a reduction in security and transparency.
Instead of storing data in just one location, distributed ledger technology (DLT) scatters it among several nodes in a peer-to-peer network.
Because it is decentralized, there must be a method for establishing the reliability of the data. Blockchain participants can agree on the present state of the ledger via this mechanism, which is called a consensus algorithm.
Two popular approaches to reaching a consensus are known as proof of work (PoW) and proof of stake (PoS).
Anyone with access to the internet may go on to a blockchain platform and become an authorized node since public blockchains do not impose any restrictions and do not need permission to operate.
This user can access current and historical data and participate in mining operations, including doing sophisticated calculations to validate transactions and add them to the ledger.
You can modify no legitimate record or marketing on the network, and anybody may check the transactions, uncover errors, or make modifications since the source code is often open source.
Advantages:
- Dependable because there are algorithms to ensure there is no fraud. It can reassure participants about the other nodes in the network.
- Because anybody may join this blockchain, its total size is rather substantial. There is a higher variation in the distribution of records to a large extent.
- The service provides a safe environment to do business while simultaneously requiring you to divulge your name or identity to participate in the activity.
- Decentralized means that a central platform does not manage the network; each user has an independent copy of the ledger.
Use Cases:
You may use proof of work and stake to secure a public blockchain. These methods can replace conventional financial systems.
The innovative contract feature of this blockchain makes it possible for this blockchain to allow decentralization. Bitcoin and Ethereum are examples of public blockchains.
Private Blockchain:
A private blockchain is a blockchain that is either permission-based or limited, and it can only function inside a closed network. Private blockchains are often utilized inside an organization or company, and only certain members of that organization or enterprise are allowed to participate in a blockchain network.
The governing organization is in charge of determining factors such as the degree of security, authorizations, permissions, and accessibility.
Therefore, private blockchains may be used in a manner that is analogous to that of a public blockchain, despite their limited network size.
Voting, managing supply chains, digital identities, asset ownership, and other use cases have led to the deployment of private blockchain networks.
Advantages:
- Because the transaction is on such a tiny scale, the pace at which it is processed is relatively quick. The verification of each node requires much less time.
- We have the power to make changes to the scalability. You may choose the scale of the network on an individual basis.
- This has increased the amount of privacy that enterprises demanded for secrecy.
- It is more balanced because only a select few users have access to the transaction, which enhances the overall speed of the network.
Use Cases:
A blockchain like this one may be an excellent tool for keeping sensitive data out of public view while ensuring its integrity if adequately protected and maintained.
As a result, businesses use them for purposes like internal audits, voting, and asset management. The Hyperledger and Corda blockchains are both examples of private blockchains.
Hybrid Blockchain:
A hybrid blockchain is a blockchain technology that includes both private and public blockchain components.
This allows enterprises to achieve their goal of having the advantages of both types of blockchains.
It makes it possible for companies to build up a private permission-based system and a public permissionless one.
This allows them to govern who may access specific data recorded in the blockchain and what data will be available to the public.
The transactions and data stored on a hybrid blockchain are not often made public; nevertheless, they may be validated if necessary, for example, by permitting access via a smart contract.
The network hides confidential information while preserving its ability to be checked. Even if a private organization controls the hybrid blockchain, that organization cannot change any transactions.
After joining a hybrid blockchain, a user is granted unrestricted access to the system’s resources. If two users do not participate in a transaction together, the user’s identity will remain hidden from the other users. The other person is then informed of their true identity at this point.
Advantages:
- Ecosystem: The hybrid nature of this blockchain is the feature that offers the most potential benefit. Because 51% of users cannot access the network, you cannot hack it.
- The cost of transactions is low since only a small number of nodes are required to validate them. Because not all nodes are responsible for the verification, the computational cost is reduced.
- Architecture: While it offers a great degree of personalization, it does not compromise integrity, security, or transparency.
- Operations: It can choose the individuals participating in the blockchain and determine which transactions will be made public.
Use Cases:
It offers a definitive answer to problems faced by the real estate and finance sectors, the government, and the healthcare business.
It provides a solution for situations in which data must be made publicly accessible while maintaining its confidentiality.
Ripple’s network and the XRP coin are examples of hybrid blockchains.
Consortium Blockchains:
These are managed by a consortium of organizations rather than a single corporation, as opposed to the private blockchain, which is operated by a single business.
Therefore, consortium blockchains benefit from a more significant degree of decentralization than private blockchains, which ultimately leads to increased levels of security.
On the other hand, consortia formation may be a difficult task since it necessitates collaboration between several different businesses.
In addition, some participants in supply chains might not have the necessary technology.
Or the infrastructure to implement blockchain tools and those that might conclude that the upfront costs are associated with digitizing their data.
And connecting to other participants in the supply chain is too high of a price to pay for the benefit.
R3, an enterprise software company, is responsible for developing a popular set of consortia blockchain solutions for financial services and other industries.
CargoSmart, a company that specializes in logistics and supply chain management, has established the Global Shipping Business Network Consortium as a not-for-profit blockchain consortium.
This organization’s overarching mission is to digitalize the shipping industry and make it possible for maritime industry operators to collaborate more effectively.
Advantages:
- Speed: Because there are so few users, you may complete verification quickly. Because of its fast pace, this is far more useful to enterprises.
- Authority: Because several groups may participate, you can decentralize the power structure on all levels. The lack of a single controlling authority enhances the system’s level of safety.
- Regarding privacy, the information contained inside the checked blocks is hidden from view by the general public. Nevertheless, every participant in the blockchain system has access to it.
- There is a significant variation in the degree to which the blockchain can be flexible. Because it is not extremely important, you may choose more quickly.
Use Cases:
It offers significant untapped potential in commercial settings, banking systems, and payment processors.
Because these firms regularly engage with their respective industries, food monitoring is a federated solution that is well-suited for their use.
Tendermint and Multichain are two examples of blockchains that are used by consortiums.
Key Takeaways:
To make wise decisions in the future, if you are a member of a public blockchain network, you must thoroughly understand how a public blockchain functions.
Ultimately, blockchain technology is growing in acceptance and support among businesses. Each blockchain type has potential uses that could raise trust and transparency while producing better transaction records.
We hope you found our explanation of the various blockchain types to be helpful. If you have any questions about a certain blockchain type? Post your thoughts below.
