INTRODUCTION
Blockchain technology is a versatile tool for secure network transactions and data sharing, with different types available to meet different use cases and applications. Multichain, for example, prevents unauthorized access to sensitive data and is only available to authorized entities within an organization. The diversity of blockchain types allows for customization and optimization to meet specific requirements of different industries and regulatory environments. There are permissionless and permissioned blockchains, which are open, trustless, and decentralized, allowing worldwide contributions. Permissioned blockchains limit access to approved organizations while prioritizing performance and privacy in a regulated environment. Consortium and hybrid blockchains combine features to address specific use cases, providing tailored solutions critical for widespread adoption across sectors and regulatory environments.
Types of Blockchain
Permissionless and permissioned blockchains serve as distinct transaction validation platforms. Permissionless blockchains, characterized by their open-source nature and absence of a central authority, prioritize transparency, decentralization, and trust. However, they demand robust hardware and a stable internet connection while facing challenges related to energy efficiency and performance scalability. In contrast, permissioned blockchains operate within a closed environment, sustaining to a limited user base. They excel in terms of transaction speed but trade-off decentralization for this advantage, potentially exposing them to integrity risks. Hybrid blockchains represent a synthesis of these two types, harnessing the strengths of both approaches to meet specific needs.
Public Blockchains
A public blockchain is a decentralized ledger system accessible to anyone with an internet connection, enabling them to become authorized nodes. Users have the capability to access records, validate transactions, and participate in the mining process. These blockchains, commonly employed for cryptocurrencies like Bitcoin and Litecoin, offer security when users adhere to rigorous security protocols. Nevertheless, risks arise when individuals fail to meticulously follow established procedures. Prominent examples of public blockchains include Bitcoin, Litecoin, and Ethereum. Public blockchains, particularly those facilitating the mining and trading of cryptocurrencies like Bitcoin, represent the most frequently utilized blockchain type.
Private Blockchain
It referred to as permissioned, enterprise, or managed blockchains, function within a controlled environment under the authority of a single entity. These blockchains operate within a limited network established within a company or organization, affording the controlling entity the ability to dictate permission levels, security measures, authorizations, and accessibility parameters. Private blockchains often exhibit faster transaction processing capabilities in comparison to public blockchains. However, they are subject to certain drawbacks, including contentious claims that they do not embody the essence of true blockchains, challenges related to establishing trust, and reduced security due to a limited number of participating nodes. They lack anonymity features and often rely on proprietary source code. Private blockchains find particular utility in scenarios requiring cryptographic security, such as trade secret management, auditing, supply chain oversight, asset ownership, and internal voting processes.
A consortium blockchain referred to as a federated blockchain, is a decentralized network where specific nodes are chosen in advance to manage the consensus process, and a dedicated validator node oversees transactions. This type of blockchain prioritizes security, scalability, and efficiency but tends to be less transparent compared to other blockchain types.
Despite its drawbacks of transparency, consortium blockchains have found practical use cases in industries such as banking, payments, research, and food tracking. These blockchains can be established through collaboration among various organizational members, ensuring collective control over transaction validation and reducing the risk of compromised nodes.
Hybrid blockchain
Certain networks require a combination of permissioned and permissionless blockchain elements, making hybrid blockchains ideal for organizations seeking to harness the best of both private and public features. Hybrid blockchains enable private transactions and the verification of records through smart contracts while safeguarding privacy. These blockchains may be owned by private organizations but retain transaction immutability. Benefits encompass the ability to operate without full public exposure, adapt rules to changing circumstances, and maintain privacy within a broader network. Hybrid blockchains find suitability in industries like real estate, retail, and highly regulated sectors such as banking. Potential transparency limitations, complexities during transitions, and a lack of incentives for network participation are major challenges of it.
Public Vs Private blockchain
PUBLIC BLOCKCHAIN PRIVATE BLOCKCHAIN
AUTHORITY Decentralized Can be centralized
ACCESS Accessible to everyone Entry by permission
NATIVE TOKEN Available Not necessary
TRANSECTION PER SEC. Less More
SPEED Slow Fast
RISK High risk of fraud, potential attacks Attack can’t be easy
ENERGY CONSUMPTION High Low
The Significance of Diverse Blockchain Types:
Individuals as well as organizations employ distributed ledger and blockchain technology for a variety of reasons, with their primary role being the facilitation of secure transactions and the transmission of data across a secure network. However, the use of these technologies is largely dependent on the specific environment in which they are used.
Consider Bitcoin, a digital cryptocurrency operates as a global public network, welcoming participants from anywhere on Earth. Users can become network nodes, validating others activities and engaging in bitcoin transactions. Suppose a financial organization, such as a bank, that uses a private blockchain network with access restrictions. Only authorized individuals can gain entry, ensuring the secure confinement of data related to the bank’s operations and financial transactions.
These technologies demonstrate remarkable adaptability, effectively meeting the unique requirements of their specific use cases, whether in open, global networks like Bitcoin or in closed, controlled networks as seen in private bank blockchains.
Conclusion
The diversity of blockchain types, underscores the adaptability and versatility of this revolutionary technology. Each type serves a distinct purpose, aligning with specific use cases and regulatory contexts. Blockchain’s capacity to enable secure transactions and data sharing holds the potential to transform a multitude of industries. The adoption of these varied blockchain types empowers organizations and individuals to customize solutions precisely, whether within open, global networks akin to Bitcoin or in the controlled environments of private bank blockchains. It promises a bright future for innovation and collaboration across diverse sectors, utilizing the full potential of blockchain technology.