Blockchain is gaining in popularity, and this has led to a high demand for its adaptation. The question remains: Do all companies adapting Blockchain share the same needs? The answer to that question is no. Types of Blockchain are required by each firm, as they have different requirements. Different versions of Blockchain with distinct characteristics are called types of Blockchain. In this tutorial, we'll explore these types of Blockchains and learn about them.
What is Blockchain?
Blockchains are decentralized databases that can be shared by computer nodes. Blockchain cloud services can collect, integrate, and share data easily from multiple sources. The data is split into blocks and linked using hashes of cryptographic nature as unique IDs.
Blockchain ensures data integrity by using a single source of truth to reduce duplication and improve security. A blockchain-based system prevents fraud and data manipulation because data cannot be altered without the consent of all nodes.
Why Do We Need Different Blockchains?
A blockchain's most fundamental use or purpose is for the secure exchange or transaction of data or information. The way that people utilize blockchain technology and the distributed ledger network varies from one case to another. If we look at Bitcoin as an example, this is the way Blockchain was introduced to mainstream society. Bitcoin is a digital currency that's transacted using DLT and blockchain technologies. Blockchain is public because anyone can join, trade, and verify bitcoins.
Let's suppose, on the other hand, that a banking institution uses a blockchain private network. This will be a network that is restricted to authorized bank members. This closed network will prevent anyone from gaining access to the bank's data. The nodes in a private network are limited, and they will be monitored by the network administrator. Information transmitted by a blockchain private network remains within that network.
The network administrator must approve any new node to be added to a private blockchain network. Banks can decide how large their Blockchain will be for each branch in the city or even all branches within a particular country. As with these examples, the network can be set up in different ways depending on its use.
Blockchains are categorized into four main types.
Public Blockchain
Public blockchains are distributed ledger systems that do not require permission. Anybody with internet access can register on a blockchain platform for a blockchain to be an authorized node. Nodes or users that are a part of the public Blockchain can access past and current records and perform proof of work for incoming blocks or mines. Public blockchains are primarily used for exchanging and mining cryptocurrencies. The most popular public blockchains include Bitcoin and Litecoin. The majority of public blockchains can be considered secure as long as users adhere to security methods and rules. It is risky only when participants do not follow security consensus protocols.
Anyone can access the public Blockchain, examine it, send transactions, and anticipate that they will be added if they are genuine. They can also take part in the consensus that determines which blocks to add to the chain and the chain's current state.
Cryptoeconomics, which combines financial incentives and cryptographic validation techniques like Proof-of-Work (for Bitcoin) and Proof-of-Stake (for Ethereum), secures public blockchains. These blockchains are typically regarded as "completely uncentralized."
The public Blockchain can be used to protect app users by showing that certain actions fall outside the authority of the blockchain developers. Public blockchains, because they're open, are more likely to be adopted and verified by many organizations without the need for third parties.
Another reason why it is so popular with supporters is the anonymity provided by a public blockchain. It's indeed a secure and open platform where you can conduct your business efficiently and safely. You are also not required to reveal your real identity to take part. If your identity is protected, no one will be able to track your activities on the network.
Security needs to be more adequate, as there is no or little privacy in secure transactions, and the computing power required is high. Blockchain use cases across industries must consider these factors.
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Advantages of Public Blockchain
Trustable
The public Blockchain is a more trustable system because it does not require nodes to be aware of each other or to have a relationship. They don't have to know each other personally or even trust them because the proof-of-work process ensures that there is no possibility of fraud. One can therefore trust the public blockchains without needing to depend on individual nodes.
Secure
Because a public network is open to as many nodes or participants as desired, it can be considered secure. As the size of the network increases, more data is distributed, and it becomes more difficult for hackers to break into the whole network.
A public network can have as many nodes or participants, making it secure. As the network grows, the more records are distributed and the harder it becomes for hackers to break into the whole network. Each node verifies transactions and performs proof-of-work, which ensures that every single block and transaction is legitimate. A public blockchain, which uses thoughtful encryption and cryptogenic practices to protect data, is safer than a private one.
Open and Transparent
Every authorized node has a copy of the blockchain records or digital ledger. Public blockchains are open, and all nodes can see the data. Every authorized node has a copy of the digital ledger technology or blockchain records. The entire system is now transparent and open. As every node is always updated with the latest database, it's impossible to hide a transaction.
Disadvantages Of Public Blockchain
Low TPS
The amount of transactions that occur in a blockchain public is very low. It is due to the large number of nodes and their time-consuming verification process. The rate at which transactions are processed in a blockchain public is extremely low. It is a large network with many nodes. Each node must verify each transaction individually and perform proof-of-work. It is because of this that public blockchains such as Bitcoin only process seven transactions every second, while Ethereum has 15 TPS. A private network like Visa, on the other hand, has a speed of 24,000. This shows a big difference between transaction execution and processing.
Scalability Issues
Transactions are completed and processed slowly. Scalability is affected. The more we expand the size of the network, the slower the speed will be. Scalability is also affected by this. The network will become slower the more you try to expand it. Bitcoin Lightning Network is one solution that helps overcome this issue. The network maintains the same rate as the number of transactions increases.
Costly and High Energy Consumption
The proof-of-work device requires a lot of power. The technology will need to create energy-efficient consensus methods. This is an issue that concerns both the environment and the economy. It is expensive and uses as much electricity as in Ireland. Technology must develop energy-efficient mechanisms for consensus.
The Public Blockchain: Uses
Voting
Blockchain can be used by governments to ensure transparency and trust.
Fundraising
Blockchain can be used to increase transparency, trust, and fundraising by businesses or other initiatives.
Private Blockchain
Private blockchains are restricted or permission-based blockchains that only operate in closed networks. Private blockchains can be used in an enterprise or organization where only a few members participate. Security, permissions, and accessibility are determined by the organization that controls the Blockchain.
While private blockchains have a smaller and more constrained network, they function identically to public blockchains. Private blockchain networks are used in blockchain applications such as Voting, supply-chain management, digital identities, asset ownership, and others.
Managed blockchains are another name for private blockchains. They are authorized and managed by a single organization. Which nodes can participate in a private chain is determined by the central authority. Every node is sometimes given different permissions to carry out tasks by the central authority. However, because there is a barrier to public access, private blockchains are only partially decentralized.
Ripple, a network for the business-to-business exchange of digital currency, and Hyperledger, an umbrella project that incorporates open-source applications based on the Blockchain, are two instances of private entire blockchains. Corporate network sharing frequently necessitates a higher level of confidentiality for data protection. A private blockchain will be the best option if this is a need. Due to their limited user base, private blockchains provide a far more reliable alternative to the public network.
Compliance is also critical in all industries. Any technology which does not adhere to strict compliance regulations is bound to fail. Private blockchains adhere to and incorporate all regulatory compliance in their ecosystem, allowing for seamless transactions.
Private and public blockchains both have their disadvantages. Public blockchains validate data more slowly than private ones, while private blockchains can be vulnerable to fraud or bad actors. The centralized model often encourages excessive reliance on management tools from third parties and benefits a small number of industry players. To overcome these shortcomings, consortium blockchains have been created.
Read More: 5 Ways That Blockchain Technology Is Changing the Business World
Advantages of Private Blockchain
Speed
The speed of private Blockchain transactions is faster. Private blockchains are faster than public blockchains. This is due to the smaller number of nodes in a private network. This means that private blockchains have a higher rate of transactions per second. It is because there are fewer nodes on a private blockchain compared to public networks. It speeds up the process by which all nodes of the network can verify a particular transaction. The rate at which new transactions are added to a block also is very fast. The private blockchains are capable of facilitating transactions up to a speed of thousands or hundreds of thousand TPS per second.
Scalable
This makes private blockchains particularly scalable, as they allow companies to increase or decrease their network size easily. Private blockchains can be easily scaled up or down. You can customize the size of a private blockchain to meet your specific needs. If, for example, an organization only needs 20 nodes in a blockchain, it can deploy just one. After expansion, if more nodes are needed, it is easy to do. Private blockchains are very scalable because they allow an organization to increase or reduce the size of its network easily.
Disadvantages of Private Blockchain
Trust Building
There are fewer participants in a private network. A public blockchain or open ledger is similar to an open book. It ensures that each user is protected and legitimate. In a private or restricted network, there is a limited number of participants, particularly within a blockchain development company where co-workers know one another. To transmit sensitive information in a network, they need to establish trust.
Lower Security
As a private network is smaller, there are more security risks. If any of the nodes gain access to the central system management, they can access all nodes within the network. It is easier to misuse information and hack into the private Blockchain if a node has access.
Centralization
This system provides full administrative and monitoring capabilities. The system has full monitoring and administrative capabilities. Private blockchains can only do so much because a centralized Identity and Access Management system is needed for them to work correctly. The system is fully equipped with monitoring and administration rights. This system controls the level of access to information in the Blockchain or permits the creation of nodes. The whole system is in contradiction to the decentralization principle, which is one of Blockchain's pillars.
Private Blockchain: Uses
Supply Chain Management
A private blockchain can be used by a business to manage its supply chain.
Asset Ownership
Using a private blockchain, you can track assets and verify their ownership.
Internal Voting
Internal Voting is possible as well with a blockchain.
Which is the Better, a Private or Public Blockchain?
Let's first analyze the two sorts of Blockchains before making a choice. Blockchains, both public and private. Both of them are different from one another. Security, transparency, and scalability are the primary areas of distinction. In cases where a private network may seem unreliable, one can rely on the entire consensus system (proof of work) of a public network.
In summary, a public ledger is the foundation for every successful application of blockchain technology that has been observed to date. The public Blockchain is safe because network hacking is virtually impossible. Because every node can access the same record in the Blockchain, it also provides data transparency. A very good illustration of a public blockchain is Bitcoin.
Hybrid Blockchain
The hybrid Blockchain combines the best of both public and private blockchains. Users can choose who has access to what data in the Blockchain with a hybrid network. A selected portion of the data from the Blockchain may be made public, while the remainder remains confidential. Hybrid blockchains are flexible, allowing users to combine a private network with several public networks easily. In a hybrid network, a transaction is typically verified in the network itself. Users can release the transaction to the public Blockchain for verification. Public blockchains have more data and require the involvement of many nodes to verify. The Blockchain is more transparent and secure.
Advantages of Hybrid Blockchain
Secure
Hybrid Blockchain is secure. It operates in a closed system, which prevents outside hackers from attacking the network at a rate of 51 percent.
Cost-Effective
The system is cost-effective and allows third parties to contact you. The transactions are quick, cheap, and scale much better than those on a public network.
Disadvantages of Hybrid Blockchain
Lack of Transparency
This type of Blockchain lacks transparency because information can be concealed.
Less Incentive
Users have little incentive to contribute or upgrade the network.
Hybrid Blockchain: Uses
Real Estate
Companies can run hybrid networks and provide information about their properties to the public.
Retail
Hybrid networks can help streamline retail processes.
High-Regulated Markets
Hybrid Blockchains can also be used in highly-regulated markets, such as the banking industry.
Consortium Blockchain
Contrary to private blockchains, which are administered by one institution, consortium blockchains have permissioned chains that are managed by an organization or group of organizations. To increase security, consortium blockchains are more decentralized than private ones. However, forming a consortium can also take time, as it requires collaboration among several companies, which is fraught with logistical problems and antitrust issues.
Certain supply chain partners may lack the infrastructure or technology required to use blockchain technologies. Some supply chain participants won't be able to afford the start-up expenses related to digitizing data or connecting to other supply chain participants.
A collection of well-known consortia blockchain solutions that are used in the banking sector were developed by the business software company R3. To digitize the shipping sector. This consortium blockchain can be supervised, and it's protected from dominance. The supervisor has the power to run rules, change balances and cancel transactions that are found to have many faults. It also performs other duties to ensure that businesses working towards the same goal can collaborate effectively.
The data from the blocks that have been reviewed are concealed, making the consortium blockchain incredibly private. Anyone who has joined the consortium has access to the Blockchain. The consortium blockchain does not charge transaction fees, in contrast to a public chain.
Another feature that distinguishes consortium blockchain from public Blockchain is flexibility. Maximum validators may experience issues with synchronization or mutual agreement in the public Blockchain. Forks result from divergence but not in a consortium network. It has its disadvantages, no matter how many benefits it offers. This Blockchain has many disadvantages, but one of them is its centralization. It is vulnerable to malicious players. It is presumed that if the number is limited, one participant is responsible.
Launching the blockchain consortium is a complex process. The protocol of communication between members must be approved by all. It is more time-consuming to establish a network of public businesses because an enterprise's flexibility is less than that of a small company. The consortium blockchain type is semi-decentralized, with a network managed by several different organizations.
A consortium blockchain is semi-decentralized in contrast to a private blockchain, in which the network is controlled by just one organization. With this kind of Blockchain, multiple organizations can work together as a network and share or mine information. Consortium blockchains are used by banks, governments, and other organizations.
Advantages of Consortium Blockchain
Securing
A consortium network is more efficient, secure, and scalable than a public one. Like private or mixed blockchains, it has access control.
Disadvantages of Consortium Blockchain
Lack of Transparency
The consortium blockchain needs to be more transparent. The Blockchain rules could render the entire network unusable if a node member is compromised.
Consortium Blockchain: Uses
Banking and Payments
Groups of banks can form a consortium to handle banking and payments. The consortium has control over the nodes that validate transactions.
Research
Researchers can use a consortium blockchain to exchange research results and data.
Food Tracking
This is also an excellent tool for tracking food.
Benefits of Blockchain Technology for Various Industries
Blockchain technology has many applications, such as supply chain management, financial services, gambling, and real estate. Smart contracts allow companies and individuals to avoid unnecessary costs and uncertainty when conducting regular business with third parties. These smart contracts are code that executes itself and is stored on an unalterable blockchain.
Bitcoin (BTC), Bitcoin Cash (BCH), Litecoin (LTC), and numerous other cryptocurrencies with an emphasis on payments all employ blockchain technology. Compared to conventional third-party suppliers, Blockchain is more effective and available everywhere.
Energy companies such as electric and gas suppliers and utilities can also benefit from the Blockchain. Smart grids are one example, as they require a local market for the supply and demand of power. Blockchain can also be used to share information securely between smart meters at homes.
Blockchain network protocols are also helping industries such as digital identification and healthcare that depend on secure and efficient data management and ownership mechanisms to find new and innovative solutions. Users can remain anonymous while transferring data using blockchains. This is done by utilizing public-key encryption, where users are given a public and private key.
Blockchain is an effective tool for securing operations, fostering trust among citizens, and streamlining government transactions. Blockchains can be used by governments to secure sensitive data such as social security numbers and birth dates. They could also protect addresses, driver's license numbers, or even address information. Blockchain could also be used by the government to reduce costs and improve efficiency. Blockchain can reduce redundancy, simplify procedures and guarantee data integrity.
Blockchain Technology: What are the Concerns for the Future?
Blockchains without a consensus-verified process or an ecosystem of stable network participants are susceptible to attacks. Consideration should be given to decentralization, throughput (the amount of data that a blockchain can process within a certain period), and the security of the network. Much attention is being paid to the Blockchain Trilemma - balancing and maximizing scalability and decentralization in one network.
Another concern about Blockchain is its environmental impact. Proof-of-work consensus, such as the PoW method of agreement, consumes large amounts of energy to run. Blockchain technology is also a source of concern due to its complexity.
Blockchain technology has been integrated into our everyday lives and businesses only recently, after the rapid rise of cryptocurrency on the financial world stage. Blockchain technology is being used by more sectors, and people are becoming aware of its utility and potential benefits in everyday life. The blockchain industry is not slowing down. It has the potential to be a part of our digital infrastructure in the future.
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Last Words
There is no simple answer to the question of which Blockchain should be used. Each Blockchain offers its benefits. Assess your needs to make sure you are making the right decision. We want you to decide, based on your understanding of blockchains, which one will best serve your needs. You can make intelligent decisions in the future if you have a thorough understanding of how public blockchains work.
