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Types of Blockchain Understanding the Difference

Understanding the difference: blockchain is an advanced database system that enables a transparent way of sharing information within a network. It is a collection of blocks containing the records of digital assets or transactions. The blocks are linked together which makes a chainlike form. Each block in the blockchain has a unique hash value and the data in blocks are immutable. So you can use this technology to create an unchangeable ledger for tracking payments, orders, and other transaction information. As the network is decentralized no one governs it. The group of nodes maintains the network making it decentralized.

What are the different types of Blockchain Networks?

There are several ways to build blockchain network types. The types of Blockchain Networks are,

Public Blockchain
Private Blockchain
Hybrid Blockchain
Consortium Blockchain

Public Blockchain

Public blockchains are permissionless blockchains. Anyone with an internet connection can participate in the data transaction by becoming a node in the network of this public blockchain. They can read, write, and audit the data. But it’s difficult for them to alter the transaction data. Each peer network has a copy of the ledger. The user has access to all records that can be historical or current records and can perform mining operations. The source code is open. No one controls these blockchain nodes. Most cryptocurrencies run on this blockchain which is governed by rules and algorithms. It uses consensus algorithms to verify information authenticity.

Public Blockchain examples are Bitcoin and cryptocurrency.

Merits of using the public blockchain

  • Maximum security as it maintains high standard security protocols.
  • Gives space for everyone to join. All needed is just an internet connection.
  • Not owned by a single authority.
  • The anonymous presence never lets anyone track your activities.
  • Entirely decentralized, with complete data transparency, and immutability.

Demerits of Public Blockchain

  • Difficult to use for companies that follow strict criteria(not suitable for the internal system).
  • A lot of processing power is required to run the decentralized system in wide areas.

Private blockchain

A single organization controls the private blockchain. It is also called managed blockchains. The authority determines who can participate and what rights they have in the network. Even though private blockchains have access restrictions, they are only partially decentralized. A private blockchain example is Ripple, a digital currency exchange network for businesses.

Merits of Private Blockchain

  • Transactions are faster when compared to the public blockchain as the network has few nodes.
  • Able to customize the private blockchain for the needs.

Demerits of Private Blockchain

  • Requires trust building to share sensitive data over the network.
  • Lower security may result in security breaches.
  • Requires a central identity to function.

Hybrid Blockchain Network

It is the combination of both private and public networks. Companies can set up permission-based systems alongside a public blockchain. In this way, they control access to specific data stored in the blockchain while keeping other data public. It uses smart contracts to allow public members to check if private transactions have been completed. Hybrid blockchains, for example, can allow the public to access digital currency but keep bank-owned currency private.

Merits of Hybrid Blockchain

  • More secure. It operates in a closed environment.
  • Cost-effective, secure, and quick transactions.

Demerits of Hybrid Blockchain

  • Lack of Transparency. The information can be hidden.
  • The users have no incentive to participate and contribute to the network.

What is Consortium Blockchain Networks?

A group of organizations governs this blockchain network. Data access rights for selected organizations are determined by selected organizations that maintain the blockchain. Industries, in which many organizations have common goals and benefit from a shared responsibility, prefer consortium blockchain networks often.

The Global Shipping Business Network Consortium, for example, uses blockchain technology to digitize the shipping industry and improve collaboration among maritime operators. It is ideal for business when all participants need to be permission as well as have a shared responsibility for the blockchain.

Merits of Consortium Blockchain

  • Compared to a public blockchain, a consortium is more secure, scalable, and efficient.
  • Has access control.

Demerits of Consortium Blockchain

  • Less transparent compared to the public blockchain.
  • Possible to be attacked by hackers if a participant node is compromised.
  • The rules of this blockchain can make the network unusable.