Everyone is
talking about blockchain, but there are many people who don't know that there
are actually classifications of blockchain.
There are four types of blockchain, namely: public blockchain, private blockchain, consortium/federated blockchain, and hybrid blockchain. Let's have a look in detail at the four possible types of blockchains.
 |
| 4 Types of Blockchain |
What Are the Different Types of Blockchains and Which One
Should You Choose?
Blockchain Technology
Overview
Blockchain
is a decentralized, immutable, and transparent distributed ledger that
maintains a list of transaction records arranged in blocks in order.
Blockchain
technology is considered to be the most attention-seeking technological
innovation since the invention of the Internet.
Blockchain
technology is a technical solution that does not rely on a third party and uses
its own distributed nodes to store, verify, transmit and communicate network
data.
Blockchain
relies on ingenious distributed algorithms of cryptography and mathematics. The
participants reached a consensus and solved the problem of reliable
transmission of trust and value at a very low cost.
The
consensus algorithm is a protocol to verify the correctness of blockchain
transactions.
For example,
Bitcoin is a public blockchain in which each node in Bitcoin uses a Proof of
Work (PoW) algorithm to reach consensus through competition to solve difficult
problems.
Therefore,
from the perspective of financial accounting, some people regard blockchain
technology as a distributed, open, and decentralized large-scale network
accounting book.
Anyone can
use the same technical standards to add their own information at any time. Blockchain
continues to meet the data entry needs brought by various needs.
Although
blockchain is usually regarded as a single technology, it can be subdivided
into the public blockchain, private blockchain, Consortium blockchain and
hybrid blockchain. Blockchain technology can be modified according to user
needs.
Types of Blockchain
Networks
There are
four main types of blockchain networks, each of which is suitable for different
purposes:
Public blockchain
A public
blockchain is a very inclusive type of blockchain network, which is open for
participation by any machine or node. Anyone can join and participate in the
public blockchain.
The public
blockchain does not require permission and does not have a single control
server,every transaction is public, and users can remain anonymous, so it is a
very reliable type of blockchain. This type of blockchain is highly democratic
and transparent because every node has equal access to data on the network. The
capacity of a public blockchain is limited to the number of participating
computers and individual capacity.
The first
blockchain created to support Bitcoin was the public blockchain. This
blockchain uses Proof of Work (PoW) algorithms to make decisions, solve
problems, and add new blocks of information through the consensus of most nodes
in the network.
It is worth
noting that public blockchains have many advantages, as they are suitable for
creating completely public platforms, such as platforms for cryptocurrency
transactions and online markets, but there are also some disadvantages of
public blockchains, for example, they
need a lot of computing power and they are not suitable for operations that
require privacy and data protection, especially in banking, customer data, etc.
Bitcoin,
Ethereum, Litecoin, etc are examples of a public blockchain.
Private blockchain
A private blockchain
is a network restricted to invited users and controlled by a single enterprise,
which determines who can read the blockchain, send transactions to the
blockchain, and participate in the consensus process.
Users who
join the network need permission to read, write or review the blockchain.
Therefore, there are different levels of access rights, and information can be
encrypted to protect business secrets.
Compared to
public blockchains that require a lot of time and resources to verify
transactions, private blockchains are faster, more effective, and more
cost-effective.
With the
help of a private blockchain, organizations can adopt distributed ledger
technology without disclosing data. But this means that the technology lacks an
important feature of blockchain: decentralization.
However,
this kind of blockchain is completely centralized, so it is only suitable for
use as a sandbox environment and cannot be used in actual production.
Some critics
believe that a private blockchain is not a blockchain at all, but a centralized
database using distributed ledger technology.
Multichain
and Hyperledger projects (Fabric, Sawtooth), Corda, etc, are examples of
private blockchains.
Consortium Blockchain
A Consortium
blockchain or Federated blockchain is a partially private blockchain where
instead of only a single organization, multiple organizations govern the
platform.
Unlike the
public blockchain, the consortium blockchain is an enterprise-level blockchain
and does not involve the issue of creating a global consensus protocol that
saves resources.
A consortium
blockchain is not a public platform rather a permissioned platform. Companies
that build private blockchains will usually build a consortium blockchain
network. This has caused some confusion on how and why this differs from a
fully private system.
In the
consortium blockchain, the consensus process is controlled by a pre-selected
group (such as a corporate group). Maybe everyone can read the blockchain and
submit transactions to the blockchain, or it may be limited to participants.
Multiple
organizations can share the responsibility of maintaining the blockchain. These
pre-selected organizations determine who can submit transactions or access data.
When all
participants need to obtain permission and share responsibility for the
blockchain, the consortium blockchain is ideal for business.
The
blockchain consortium provides many of the same benefits of the private
blockchain (efficiency, transaction privacy, etc.), without consolidating power
with just one party.
Energy Web
Foundation, R3, etc, are examples of consortium blockchain.
Hybrid blockchain
Hybrid
blockchain refers to a combination of the public and private blockchain. The
best way to describe hybrid blockchain is using a public blockchain where a
private network is hosted.
A hybrid
blockchain uses the features of both public and private blockchains where one
can own a private permission-based system as well as a public permission-less
system.
The
blockchain hybrid system is flexible so that users can easily join a private
blockchain with multiple public blockchains and can control who has access to
the data stored in the blockchain.
Public and
authorized blockchains interoperate using the same easy-to-use smart contract
language. And they can seamlessly interact to create a safer and more secure
digital marketplace - and pave the way for a different kind of shared economy.
Dragonchain,
IBM Food Trust™, etc are examples of a hybrid blockchain.
Conclusion:
The most
famous public blockchain is used by cryptocurrencies, such as Bitcoin
transactions. The public blockchain is completely transparent. However, such
technology is not suitable for organizations that need to handle sensitive
information such as business contracts or personal data.
Private
institutions are more likely to join a private blockchain, which allows only
invited users to conduct transactions and does not disclose data. The private
blockchain can assign different levels of permissions to users, restrict user
access, and can encrypt information to protect the confidentiality of data.
Both public
and private blockchains have certain distinctions from one another. You have to
decide which blockchain networks will serve your purpose best.
Currently, among the four methods of building a blockchain network, the consortium blockchain is the most popular.