Meet The Next Game-Changer In Blockchain
By Shubhi Tiwari on ALTCOIN MAGAZINE
After the internet, Bitcoin is the most revolutionary breakthrough. It is the world’s largest cryptocurrency, followed by Ethereum and Ripple, in market capitalization. Bitcoin and Ethereum are distributed public blockchain networks. Ownership of digital currency can be tracked by the Bitcoin blockchain. It is a secure, censorship-resistant system of value, while Ethereum’s chain can have decentralized applications, build & run their programming code on the network, which is why it’s called the “decentralized world computer”. Ripple is considered to be the global settlement network due to its scalability, speed, and cost. It has been adopted by private banks like Federal, Kotak, Axis. It will soon be using the game-changing technology, Hybrid blockchains, the best of both public and private blockchains.
Before we delve into Hybrid blockchains, let us understand in brief what public and private blockchains are. You can also find useful links within the paragraphs as you proceed.
Public Blockchain
A public blockchain is a permissionless network that creates an immutable history of data, which is beneficial to decentralized cryptocurrencies, as they demand the need for transaction history to be visible to everyone on the network. The consensus protocol can be joined by any individual who can also participate to maintain the visibility of shared ledger. Data is transparent on a public blockchain. No one controls it, yet everyone uses it.
However, it raises a concern for companies & government bodies with private or regulated data, because there is no requirement at all to share that data with the rest of the network.
The original consensus algorithm, Proof of Work (PoW) requires high computational power with an immense quantity of electricity. Such resource calls will surely limit users to join the network. This is one of the reasons why public blockchains have scalability issues. Also, there’s a limit on the number of transactions and the speed with which it can process.
Private Blockchain
Private blockchains are permissioned networks where groups or organizations can customize and control how they interact. There’s a restriction on who can participate in the network or any transaction, unlike the case in public blockchains. This controlled access to the ledger will make it harder for any malicious entity to enter the network.
The access of a private blockchain is limited to its users. The authority who manages the private chain can only give access to its users. Hence, organizations that want to benefit from the blockchain but in a closed and controlled network will deploy a private blockchain. Since they operate in a trusted network, they require less extensive consensus which improves scalability. This is more acceptable by large enterprises, having data that has high integrity and cannot be shared with the world outside.
However, this is not a completely decentralized system in its true sense.
Now, let’s understand what are hybrid blockchains,
Hybrid Blockchain
They are simply enterprise-ready blockchain solutions that give the benefit of decentralization while remaining compliant with their local laws & regulations. Highly regulated government bodies or enterprises are tightly controlled with local laws and regulations. By using hybrid blockchains, they get control over what data needs to be kept private and what data can be shared on the public ledger.
Governments, businesses, banking, asset & bond markets, infrastructure sector, financial sector, settlements, and forex are the primary actors of a hybrid blockchain. The networks that interact with these entities are governed by centralized laws and regulations, including different global networks.
Why Adopt Hybrid Blockchain
Both public and private blockchains, individually, cannot offer complete benefits of decentralization. That’s where hybrid blockchains come into play. Highly regulated bodies can deploy hybrid blockchains, where they can limit access to certain data in a permissioned network, while also interacting with a permissionless network, i.e. public blockchain. They obtain controlled access and acquire freedom at the same time.
For instance, a decentralized peer to peer marketplace named TradeFinex is a platform that brings together buyers, suppliers, government bodies and other institutions. It uses Xinfin’s hybrid blockchain that empowers peer to peer cross-trade finance across individuals who do not have access to banks, the unbanked population.
Even though a group of individuals controls the network, they will strictly not be able to tamper with the immutability and security of transactions on the private blockchain. And whenever there’s a need for verification, the public blockchain will take care of it.
Benefits Of Hybrid Blockchain
- Ability to harness the power of blockchain, while protecting the data from external entities.
- It helps to preserve confidentiality.
- Immune to 51% attack. Impossible for hackers to carry out attacks as they won’t be able to get any access to the chain or network.
- Low transaction cost. Requires less amount of nodes for verification. Even the transaction fee is reduced.
- Rules can be changed whenever required.
User Interactions In A Hybrid Blockchain
A user can fully participate in all blockchain activities as soon as he gets access to it. He gets equal rights to execute, modify or append transactions. Here, the identity of users is kept confidential from other participants, to maintain the privacy of the user. His identity is revealed to the other party only when there’s an interaction required. To ensure the identification process is done right, KYC (Know Your Customer) is carried out. It helps financial institutions maintain the anonymity of their users so that no outside entity can know about them.
In a hybrid blockchain, the hash of transactions is stored and verified on the public chain. You will find security, immutability, transparency, and decentralization, plus at the same time, external users will be denied access to view or edit transactions, like on a private chain. In simple terms, you get to experience the best of both worlds.
To Conclude
Organizations that do not want to uncover their critical data, but want to avail the advantages of a blockchain, are the most suited. A hybrid blockchain can be distinguished by the reality that it is not open to the outside world, but still provides transparency and integrity of data with security. The development of hybrid blockchain is a vital step towards the mainstream adoption of decentralized technology.
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