There are four major types of blockchain networks - public, private, consortium, and hybrid. Each has unique benefits and use cases. Read on.
With the rise of Bitcoin as a blockchain-based technology, many enterprises are moving their blockchain projects into production. The world is getting to know the different use cases of the technology. To know the technology better, it's better to start with the different types of blockchain.
4 Major Types of Blockchain Technology
There are four major types of blockchain networks - public, private, consortium, and hybrid. Each one of the platforms has unique benefits and use cases. Here is a brief overview.
A public blockchain is what popularized distributed ledger technology (DLT) and later its application, Bitcoin. DLT doesn't store information in a single location. Instead, it distributes the info across a network. A public blockchain is non-restrictive and permissionless. Users cannot record or perform transactions without authorization, and anyone can verify the records, find bugs or make necessary changes because of the open source nature of the code.
A significant benefit of public blockchains is that they are entirely independent of enterprises. Network transparency is yet another important advantage. Blockchains are widely used in the mining and exchanging of cryptocurrencies such as Bitcoin. Additionally, they can also be used to create fixed records with an auditable chain of custody. A public blockchain is built on transparency and trust and hence is favored by social groups, NGOs, etc.
A private blockchain is a network that works in a closed network, on a much smaller scale, under the control of a single entity. Similar to a public blockchain, it uses peer-to-peer connections and decentralization. A private blockchain is also known as permission or enterprise blockchain. Since the controlling entity sets the required permission levels, security, authorizations, and accessibility, private blockchains can quickly process transactions faster than their public counterparts. This speed factor of private blockchains makes them ideal cryptographically secure use cases. Other uses include supply chain management, internal voting processes, and asset ownership, etc.
A consortium blockchain is also called a federated blockchain. It features both private and public blockchain features. Multiple organizational members work together on a decentralized network to form consortium blockchains. A consortium blockchain is essentially a private blockchain providing limited access to a particular group, eliminating a single entity control risks.
Compared to public blockchains, consortium blockchains are perceived as more secure, scalable, and efficient. Therefore, it is a favorite for sectors such as banking and research organizations. It is also primarily favored by supply chains in the food and medical industries.
Often, organizations will want the best of all options. With blockchain, that's when they adopt Hybrid blockchain models, bringing together both public and private blockchains. This type of blockchain has some differences in operation compared to consortium blockchains. The hybrid model allows enterprises to set up a private, permission-based system parallel with a public open source system. This setup gives users full access to the network and enables them to control who can access specific data within and what data will be public.
One of the significant advantages of hybrid blockchain is that hackers cannot launch an attack on the whole network because it works within a closed system. It gives a level of privacy while also giving communication ability with third parties. Furthermore, transactions are cheap and fast, and it offers better scalability than a public blockchain network.
Companies use a hybrid blockchain system to run things privately but having some information public. Retail and real estate industries use the hybrid model to streamline their processes. The medical industry and government entities also make use of hybrid blockchains.
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