Without a question, blockchain has progressed significantly during the last decade. It all started with Bitcoin’s blockchain which can also be considered the first generation of blockchain technology.
Right now, there are several varieties of blockchain technology, each of which serves a certain purpose and addresses a specific problem or group of problems. More importantly, many businesses are adopting them into their operations to maximize the advantages.
We’ll learn about the four different types of blockchains and their relevance in this article. We will determine which sort of blockchain is best suited with the greatest benefits once we have a good understanding of the varieties. So, let’s get this ball rolling.
What exactly are blockchains?
In essence, a blockchain is a digital, ever-growing collection of data entries. A list like that would consist of numerous data blocks structured in chronological order and linked and guarded by cryptographic proofs. With the use of decentralization and cryptographic hashing, blockchain, also known as Distributed Ledger Technology (DLT), allows the record of any digital asset unchangeable and transparent.
A blockchain is a database that holds encrypted data blocks and links them together to build a chronological chain of truth. It is a distributed ledger technology that produces an immutable record of all digital assets. The integrity of the document is protected thanks to visible documentation of changes, which increases trust in the asset. It has inherent security features that make it an ideal technology for practically every industry.
The Need for Different Blockchains
The most basic requirement of a blockchain is to transact or exchange information across a secure network. However, depending on the situation, people utilize blockchain and distributed ledger technologies or networks in different ways. Take, for example, Bitcoin, which is how blockchain was first exposed to the general public. Bitcoin is a digital money that is traded using blockchain and distributed ledger technology. People from all over the world can become nodes, verify other nodes, and exchange bitcoins on this form of blockchain network, making it a public network.
Assume a bank, on the other hand, uses a private blockchain network. It will be a password-protected network to which only the bank’s approved members will have access. As a result, no one outside of this restricted network can access bank data. A network administrator will monitor a private network’s limited and authorized nodes. The data transmitted through a private blockchain network remains within the network. Any new node wishing to join a private network must first obtain authorization from the network administrator. The bank has complete control over the size of its private blockchain, whether it is for all of its branches in a city or all of its branches across the country.
Hence arises the need for different types of Blockchains.
Four variations of blockchains
Private and public blockchains are the two main forms of blockchains. There are, however, certain variations, such as Consortium and Hybrid blockchains. Let’s take a look at what the various types of blockchains have in common before we get into the intricacies.
Common Factors
Every blockchain is made up of a group of nodes connected by a peer-to-peer (P2P) network. Every node in the network has a duplicate of the ledger, which is regularly updated. Each node is capable of validating transactions, sending and receiving messages, and generating blocks.
Blockchain Types Simplified
Blockchain technology is categorized into the following:
Public blockchain
A public blockchain is a decentralized ledger that anybody can join or use to conduct transactions. It’s a non-restrictive ledger in which each peer has their own copy. Anyone with internet access can access the public blockchain. Popular public blockchains like Bitcoin, Ethereum, and Litecoin may be familiar to you.
Private blockchain
A private blockchain is one that runs in a limited setting, such as a closed network. It’s also a permissioned blockchain that’s managed by a single entity. As a result, private blockchains are comparable to public blockchains in terms of functionality, but they have a smaller and more restricted network. Voting, supply chain management, digital identity, asset ownership, and other applications use private blockchain networks. Some examples of private blockchain networks include Ripple (XRP) and Hyperledger.
Consortium blockchains
A consortium blockchain (otherwise known as Federated blockchains) is a novel way to address the demands of businesses that want both public and private functionality. Some features of the organizations are made public in a consortium blockchain, while others are kept private. Banks, government agencies, and other institutions frequently use consortium blockchains. Hyperledger, Corda, Quorum are examples of Consortium blockchains
Hybrid blockchains
A hybrid blockchain is a mix of private and public blockchains. It has applications in organizations that don’t want to implement either a private or public blockchain and instead want to use the best of both worlds. In a hybrid blockchain, transactions and records are typically not made public, but they can be validated when necessary, for as by granting access through a smart contract. Classified data is held secure while remaining verifiable within the network.
Even when a private organization possesses the hybrid blockchain, it cannot make changes to transactions. When a user joins such a hybrid blockchain network, they have full access to it. The participant’s identification is protected from other users until they participate in a transaction. The genuine identity of the other individual is then revealed to them.
Xinfin is a hybrid blockchain built on the Ethereum (public blockchain) and Quorum platforms (private blockchain).
Our Thoughts
Before coming to a conclusion, we looked into the two primary types of blockchains: private and public blockchains. They are distinct from one another in several ways. The primary distinctions, however, are in terms of security, scalability, and openness. On the one hand, when a private network may not appear to be very trustworthy, a public network’s consensus (proof-of-work) system can be entirely trusted.
In essence, every successful blockchain application that we have seen so far has been on a public blockchain. Because attacking the entire network is nearly impossible, public blockchain ensures security. Furthermore, it provides data transparency because every node has equal access to the blockchain record. The Bitcoin system is one of the most successful examples of a public blockchain.
Finally, we’d like you to apply your knowledge to determine which blockchain will best fit your needs.
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