What are the Different Types of Blockchains? - Decide which one is suitable for your Business
In this blog, we are going to learn about the 4 various types of blockchain networks and their significance. Basic understanding of the blockchain types, we will find out which type of blockchain network is best suited with most business benefits.
Types of Blockchain Networks – Decide which one is suitable for your Investment Needs
In this blog, we are going to learn about the 4 various types of blockchain networks and their significance. Once we are going through with the fundamental understanding of the blockchain types, we will find out which type of blockchain network is best suited with the most business benefits.
So, let’s get started.
Why do we need Different Blockchain Networks?
The most essential requirement or blockchain application is to carry out the exchange of information through a secure network. But the way crypto investors use blockchain technology and distributed ledger or network differ from case to case. For example, if we talk about Bitcoin (top Cryptocurrency), which is how blockchain network got introduced in the significant mainstream. Cryptocurrency is a digital currency that gets transacted through the blockchain network and DLT technologies. This type of blockchain network is a public blockchain network because crypto people from all over the world can become a node, validate and verify other node and trade cryptocurrencies or bitcoins.
Just like the below examples, there are various ways in which the blockchain network is set up depending on the business use and requirements.
Types of Blockchains
There are primarily 2 types of blockchain networks
However, there are many variations too, like Consortium blockchains and Hybrid blockchains. Before we get into details of the various types of blockchain networks, let us first know what similarities do they actually share. Every blockchain network consists of a cluster of nodes functioning on a P2P network system. Each and every node in a blockchain network has a copy of the shared ledger which gets updated instantly. Each node can verify all crypto transactions, activities, initiate or receive crypto transactions and create certain blocks.
1. Public Blockchain
A public blockchain is a non-restrictive type and permission-less distributed ledger system.
Anyone who has activated to the internet can sign in on a blockchain-supported platform to become a high authorized node and be a significant part of the blockchain network.
A node or user which is a part of the public blockchain network is authorized to activate current and past data, validate and verify transactions or do proof-of-work for an incoming block, and do cryptocurrency mining.
The most basic use of public blockchain networks is for cryptocurrency mining and cryptocurrency trading.
Thus, the most common public blockchain networks are Bitcoin and Litecoin blockchain networks.
Public blockchain networks are mostly safe and secure if the participants strictly follow security rules, regulations, and methods.
However, it is only high risky when the users don’t follow the particular security protocols sincerely.
Example: Bitcoin, Ethereum, Dogecoin, Litecoin
Advantages of Public Blockchain
Open and Transparent
Disadvantages of Private Blockchain
High Energy Consumption
2. Private Blockchain
A private blockchain is a restrictive method or permission blockchain operative only in a closed blockchain network.
Private blockchains are usually used within an organization, industries or enterprises where only selected users are participants of a blockchain network.
The level of high security, permissions, authorizations and accessibility is in the hands of the controlling entreprises organization.
Thus, private blockchains are similar in use as a public blockchain network but have a restrictive network.
Private blockchains are delievered for mainly voting, supply chain management, asset ownership, digital identity etc.
Examples of private blockchains are; Multichain, Corda and Hyperledger projects (Fabric, Sawtooth) etc.
Advantages of Private Blockchain
Disadvantages of Private Blockchain
3. Consortium Blockchain
A consortium blockchain is a semi-decentralized method where more than one organization manages a blockchain.
This is slightly contrary to what we already saw in a private blockchain network, which is maintained by only a single company or organization. More than one company or organization can perform as a node in this type of blockchain network and exchange data or do cryptocurrency mining.
Consortium blockchain networks are mainly used by banks, government organizations, etc.
Examples of consortium blockchain: Energy Web Foundation, R3, etc.
4. Hybrid Blockchain
A hybrid blockchain is a combination of the private blockchain and public blockchain.
Hybrid Blockchain uses the features of both types of blockchains that is one can have a private permission-based system as well as a public permission-less system.
With such a hybrid blockchain network, participants can control who gets access to which data stored in the blockchain network.
Only a selected part of the information from the blockchain network can be permitted to go public keeping the rest confidential in the private blockchain network.
The hybrid method of the blockchain network is highly flexible so that participants can easily connect a private blockchain network with multiple public blockchain networks.
A transaction in a private blockchain network of a hybrid blockchain is usually verified and validated within that blockchain network.
But participants can also release it in the public blockchain network to get validated. The public blockchain network increase the hashing & also involve more nodes for validation or verification.
This hybrid blockchain network enhances the security & transparency of the blockchain network.
Example of a hybrid blockchain: Dragonchain.
Private or Public Blockchain network, which one is better?
Well, Both of them have particular distinctions from one another network. However, the major differences lie in terms of transparency, security, and scalability. A private blockchain network might not seem a very trustworthy network, you can completely rely on a public blockchain network for its intact consensus (proof-of-work) method or system. Public blockchain network provides guarantees security as hacking the complete network is almost impossible fact actually.
In addition, Public blockchain offers data security and transparency as every node has equal access to the data stored in the blockchain network. One of the best examples of a public blockchain network is the Bitcoin system.