In our previous article, we covered how artists could explore the NFT space, we also touch on proof of ownership and IFPS. Let’s do a deep dive into the different types of blockchain technology.
How do you define a blockchain? Blockchains are distributed and decentralized public ledgers or a continuously growing collection of records. A blockchain is the perfect example of a democratized system.
There are four primary types of blockchain networks. Each network has advantages, weaknesses, and illustrative uses.
- Public Blockchain
A public blockchain is an open-source permissionless distributed ledger technology that any entity can the network, and each participant has access to the ledger. Transactions verifications use consensus methods such as Proof-of-Work (PoW), Proof-of-Stake(PoS), etc. If a public blockchain doesn’t have the required peers participating in solving transactions, then it will become non-functional.
The most significant benefit of public blockchains is that they are entirely independent of organizations. However, if the organization that starts the blockchain ceases to exist, a public blockchain can still run, as long as computers stay on the network. Another benefit of public blockchains is transparency, and they are predominantly unassailable if the users observe security protocols and methods.
The network can be sluggish, and no one can prohibit access or use. Also, if hackers gain 51% or more of the computing power in a public network, they can unilaterally alter it. Public blockchains have trouble with scalability. The network slows as more nodes join their networks.
Use Cases for Public Blockchain
- Fundraising: Initiatives use public blockchains to enhance transparency and confidence in crowdfunding.
- Voting through a public blockchain enforces transparency and trust.
Public blockchains are ideal for organizations that are built on transparency, such as non-governmental organizations or social support groups.
- Private Blockchain
A private blockchain works in a secure and restrictive environment or a closed network. It is a permissioned blockchain that falls under a centralized entity. Private blockchains are excellent for privately-run organizations that desire to utilize blockchain for internal purposes. Private blockchains effectively allow only designated participants to access their network. These protocols can set distinct parameters to the network, including accessibilities, authorizations, etc.
Use Cases for Private Blockchain
- Asset license: Assets are verified and tracked using private blockchains.
- Internal Voting: Safely poll organizations for needs.
- Supply chain management: Private blockchains allow for efficient oversight internally.
Other use cases for private blockchain include supply chain management, asset ownership, and internal voting. The mandating entity or entities sets the authorization levels, security, permissions, and accessibility. Controlling organizations can specify which nodes can view, add or modify information. Management can also prevent third parties from accessing specific data. Private blockchains usually have fewer users; therefore, they can rapidly process transactions.
It is challenging to trust private blockchain data comprehensively since centralized nodes demarcate validity. Lastly, private blockchains have fewer nodes, resulting in less security. If several nodes disconnect, the consensus method can be compromised. The source code from private blockchains are often impenetrable and proprietary. Users can not independently verify audits or confirm them, leading to fewer security risks. Also, no anonymity exists on a private blockchain.
We took in a lot of information on Private and Public blockchains. Let’s compare and contrast them for a deeper understanding.
Private blockchains are centralized. Single entities govern the system, leading to dependence on third parties for transactions. Only the entities partaking in transactions are allowed the commerce data. Public blockchains are decentralized. No single entity controls them. Anyone can join the network and read, write, or participate in public blockchains. Data is secure as immutability doesn’t allow revisions with validated on-chain information.
Bitcoin, Ethereum, EOS, NEO, and Cardano are successful public blockchains. R3 Corda, Quorum, Ripple, and Hyperledger Fabric of Linux Foundation are successful private blockchains. Blockchain is an intricate and expanding industry containing countless concepts. It is essential to comprehend its features that differentiate blockchain types as it’s advantageous in elevating your financial future.
- Consortium Blockchain
Consortium blockchains or Federated blockchains are clever approaches where there is a requirement for public and private features. Consequently, organizations utilizing these blockchains can allow some data to be shared while sensitive information remains confidential. A consortium shares similarities with other blockchains; however, they differ in where multiple organizational members can collaborate on a decentralized network. The preset nodes control the consensus procedures in a consortium blockchain, and more than one organization manages the blockchain; therefore, there is no single centralized component.
The consortium validator node validates transactions and initiates and or receives transactions. For comparison, the member node can only receive and initiate transactions. Consortium chains retain features of private blockchains, including transparency, privacy, and efficiency, without one entity controlling consolidating power.
Use Cases for Consortium Blockchain
- Banking transactions: Bodies of banks can assemble a consortium by deciding on the nodes that will validate transactions.
- Produce/Food tracking: Helpful for supply chain needs.
- Research: Useful for scientific study and publishing.
Blockchain consortia is evolving marketplace operations. Rather than competitions, there are collaborations. To develop an enterprise solution, begin by joining a consortium where your values are nurtured.
Consortium blockchains are also a lot like private blockchains. Single entities govern the centralized system, leading to dependence on third parties for transactions. Private blockchain solutions can’t offer true decentralization. Rather, it’s a network with a set of rules and regulations. Consortiums have multiple organizations governing them. They can agree to make changes to the network. Consortiums help enterprises collaborate; companies unite and focus on goals, yielding joint exposure.
Both private blockchain and consortium blockchains are highly effective for enterprise companies. They can also offer privacy, security, and fast performance, and it’s become simple to integrate them.
At this point, you should have learned about Public, Private, and Consortium blockchain types- now, it’s safe to embark on Hybrid Blockchains, which take the best attributes of all other blockchain types and mesh them into their own chain.
- Hybrid Blockchain
Hybrid blockchains are best described as private and public blockchain combinations. They have use-cases in an organization that neither wants to deploy a private nor public blockchain and merely wants the best of both chains. Hybrid blockchains allow organizations to create a private permissioned system alongside a permissionless public system. Although private entities own hybrid blockchains, the entities cannot alter, modify or change transactions. Upon joining a hybrid blockchain, users have full access to the network, while the user’s identity is protected from others unless engaging in a transaction.
Hybrid blockchains are not easily hacked or tampered with related to their enclosed ecosystem. Hybrids have a flexible process of customizing the ledger according to needs. One can permanently alter the level of decentralization, transparency, and security required in the blockchain.
Use Cases for Hybrid Blockchain
- Highly regulated markets: Highly controlled financial markets.
- Real estate: Useful in real-estate companies to run their internal and external data systems and transactions.
- Retail: Hybrid chains streamline retail processes.
Consortium blockchains are a lot like Hybrid blockchains. Hybrid blockchains enable institutions to set up a private, permission-based system alongside a public permissionless system, allowing control with accessing specific information stored on-chain and sharing information. Consortiums are private blockchains granting restricted access to respective parties, eradicating many crapshoots with single controlling entities on a private blockchain network. Many blockchains exist beyond Bitcoin, Ethereum, and Waves. Federated and hybrid are private and public blockchain divergences that suit specific use cases. Remember to analyze many consensuses before you establish your blockchain solution.
With a foundation on the different types of blockchain, lets explore some successful projects within each blockchain protocol.
Public Blockchains To Observe
Bitcoin uses a Proof-of-Work (POW) mechanism to designate consensus across the network distribution.
Ethereum enables Smart Contracts and Distributed Applications creation without downtime, forgery, guardianship, or interference from third parties.
NEO is for a scalable network of decentralized applications, with a particular focus in digitizing assets on the blockchain.
WAVES focuses on providing a simple interface for users creating their own custom tokens.
Private Blockchains To Observe
Ripple Labs Inc’s, RippleNet is a private consensus algorithm powering a fast global payments business that inexpensive and secure for institutions. More enterprises with practical private blockchains include Hyperledger Fabric of the Linux Foundation, IBM, Amazon, and Microsoft. Any institution can develop a private blockchain, customizing its procedures to suit. MELLODDY Project, MyClinic.com, KitChain, Verified.Me are examples of healthcare protocols supported by Hyperledger.
Consortium Blockchains To Observe
Quorum is an enterprise distributed platform that has been developed to provide financial parties with a permissioned execution of Ethereum supporting transaction and smart contract privacy.
Hyperledger is an open-source collaborative effort that has been created to advance cross-industry blockchain technologies.
Corda is an open-source blockchain for enterprise use allowing companies to build networks facilitating direct business-to-business transactions and includes smart contract privacy.
Hybrid Blockchains To Observe
IBM Food Trust, an ecosystem of manufacturers, merchandisers, producers, suppliers, etc; creating a more capable, securer, sustainable food system for all. DragonChain offers corporations the prospect of deploying inventive resolutions.
Understanding different blockchain types and projects within each technology class will allow a foundation to assist with professional advancements in blockchain solutions and investing.
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