In the last few decades, Blockchain technology has experienced a significant boost in terms of popularity and applications in the modern world. But do you know from where all of this started?
It started when Bitcoin came into the picture and became the first type of blockchain, i.e., the public blockchain. It was later considered the first generation of blockchain technology. But if we talk about the current scenario, there are many different types of blockchains. Each of them is defined for a specific purpose and solves a specific type of problem.
What Is the Need for Different Types of Blockchains?
If we talk about the most essential need of different types of blockchain technologies, then it is used for making payments and exchanging information over a secure gateway. Apart from this, people use different types of blockchains for conducting different operations based on their requirements.
Let us take the example of Bitcoin, which was the first type of blockchain to be presented in public. So, Bitcoin is basically a cryptocurrency or digital money that can be exchanged by using blockchain technology.
Blockchain technology initiates transactions from one node and terminates on another node. In the same way, when people from all around the world trade or exchange Bitcoins, then they become nodes. For a successful transaction, these initiating nodes verify the other nodes present in the blockchain network. Therefore, Bitcoin exchange comes under the public blockchain as it operates over a public network.
Now, let’s take an example of a bank that operates over a private blockchain network. Being private, this network is limited. Only some of the registered bank staff will have access to the private information of the bank, due to which no unauthorized person can access the bank’s private information.
In the private blockchain network, there are a restricted number of permitted nodes that are fully managed by the administrator of the blockchain network. Whatever data or information travels in a private blockchain network is always kept within it. Whenever any new unpermitted node tries to enter the private network, it is first taken to the network administrator for authorization.
Different Types of Blockchains
Now that as we have understood the need for different types of blockchain networks, let’s move ahead to what are the types of blockchains. So, primarily there are two main types of blockchains, namely private blockchain and public blockchain.
However, there are two more types of blockchain networks, i.e., consortium blockchain and hybrid blockchain. Let’s discuss all of them in-depth.
A public blockchain network is a type of non-restricted transaction network that is open to the public and does not require any permission to enter into the network. If you have an active internet connection, can you join any public blockchain network and become an authorized member of the network.
Being an authorized member or node, you have all the permissions to view the latest and past information of the operations conducted over the network, authentic transactions, and even conduct the proof-of-work for data mining.
Talking about safety and privacy, public blockchain networks are secure if the members strictly adhere to the rules and guidelines.
Where is it used?
The public blockchain network is majorly used in cryptocurrency mining and exchange activities. You can also use it to obtain permanent data records that consist of an auditable chain of actions. The electronic certification of legal affidavits or property records is a few examples of public blockchain technology.
A private blockchain is basically a restricted network that requires special permission to enter. This type of blockchain network is mostly used in those industries and sectors where a small portion of members are required to participate in the network transactions.
The network administrator has the responsibility to manage the level of security, number of users, authorization, and the special permissions to enter into the network.
When compared to the public blockchain network, the private blockchain also offers the same functionality, but it keeps the network restricted to authorized users.
Where is it used?
The private blockchain network is primarily used where the network needs to be secured from external entities. Some common use cases of private blockchain include public voting, asset ownership, supply chain management, and many more.
A consortium blockchain is a semi-decentralized network that evolves multiple network administrators. This type of blockchain network is completely opposite to the private blockchain network, where a single network administrator administers the whole network.
In the consortium blockchain network, multiple organizations can operate as a node to successfully complete transactions and exchange information. This type of blockchain is commonly used in banks and government agencies.
Where is it used?
The consortium blockchain network is used in banking, payments, food or delivery tracking, and research.
A hybrid blockchain network is a combination of private blockchain and public blockchain networks. With this type of blockchain, you will get the features of restricted as well as unrestricted networks.
The members of the network have the authority to manage the accessibility of the information stored over the hybrid blockchain network. But there is one important thing that you must keep in mind, that is, only a small portion of the data and information present on the network can be made public, and the rest will remain private.
The hybrid blockchain is highly scalable since it enables the members of the private blockchain network to connect with different public blockchain networks without any hassle.
Where is it used?
One of the most common applications of hybrid blockchain can be witnessed in the real estate industry, where the blockchain network allows some information to get public, i.e., property listings, and the rest remains private. Apart from this, it is also used in the retail and finance industries.
Which Type of Blockchain Should You Choose?
Since every type of blockchain network is different, therefore, all of them offer different features. There is no straightforward answer to the question that which one is the best. All in all, it completely depends on your personal requirements.
To help you make an informed decision, we have compiled a list of features offered by different types of blockchain networks. Let’s have a look at them, one by one.
Public Blockchain Network
As we have discussed in the above section, the public blockchain network is freely accessible to anyone having an active internet connection. Therefore, this type of blockchain is best for those organization that values customer trust and is open to everyone.
Some public organizations such as NGOs and SSGs are the best examples of public blockchain networks. Due to its permissionless functionality, it is not favorable for conducting private operations. The main reason behind this fact is the confidentiality of user data and information.
Apart from this, public blockchain is much more costly for the network administrator because it requires multiple nodes to operate as miners and function as either Proof-of-Work or Proof-of-Stack.
Therefore, if you are planning to launch a new cryptocurrency in the market, public blockchain is the best option for you.
Private Blockchain Network
Now, let’s talk about the private blockchain network. As we know that private blockchain is completely opposite to the public blockchain; therefore, it is the best option for those organizations who need a private blockchain network to operate.
This type of blockchain network is centralized, which means that the organization can manage the whole network as the network administrator and keep it restricted from the general public.
The private blockchain offers all the blockchain benefits while also allowing the network members to ensure security and confidentiality.
Consortium Blockchain Network
Let’s move forward to the consortium blockchain network, where the network is controlled and managed by a group of organizations instead of a single entity. The main benefit of a consortium blockchain is that it consists of pre-selected nodes.
This type of blockchain network is the best choice for those industries and organization that requires a cross-functional collaboration such as supply chain, food, textile, pharmaceuticals, and many more.
Hybrid Blockchain Network
Last but not the least, we have a hybrid blockchain on the list. This type of blockchain technology is the most latest in the industry. The hybrid blockchain network is the most suitable option if you want to enjoy the benefits of public as well as private blockchain.
However, the hybrid blockchain technology has its own set of drawbacks, but they cannot overpower its benefits. This type of blockchain is ideal for modern business models.
The Bottom Line
So, here we have reached the end of our article. If you are an enterprise that wants to carry out transactions and information exchange over the blockchain network that too without making anything public, then you must go for a private blockchain network.
However, a public blockchain network is ideal for those organizations that require transparency in their network. Therefore, it is not considered as a good option for a private organization that respects its customer privacy.
In the end, blockchain is an evolving technology that is gaining enormous popularity and getting widely accepted throughout the business industry. All these types of blockchain technologies that we have discussed are unique in their own ways and have their own set of functionalities that conducts all the transactions.