Different types of Blockchains

Blockchain is defined as a ledger of decentralized data that is securely shared. Blockchain technology enables a collective group of select participants to share data. With blockchain cloud services, transactional data from multiple sources can be easily collected, integrated, and shared. Data is broken up into shared blocks that are chained together with unique identifiers in the form of cryptographic hashes. Blockchain provides data integrity with a single source of truth, eliminating data duplication and increasing security. In a blockchain system, fraud and data tampering are prevented because data can’t be altered without the permission of a quorum of the parties. A blockchain ledger can be shared, but not altered. If someone tries to alter data, all participants will be alerted and will know who make the attempt.

4 Main Types of Blockchain Networks

There are four main types of blockchain networks: public blockchains, private blockchains, consortium blockchains and hybrid blockchains. Each one of these platforms has its benefits, drawbacks, and ideal uses. While the blockchain technology behind projects is the same, the target end users of the different types of blockchain may differ. However, private blockchains are geared toward invitation-only users and their networks. The basic application of the blockchain is to perform transactions in a secure network. That’s why people use blockchain and ledger technology in different scenarios. One can set up multichain to prevent unauthorized access to sensitive data. It is not available to the public, and can only be available to authorized entities in the organization. It depends on the organization which type it requires to choose for their work.

Public Blockchain

The first type of blockchain technology is public blockchain. This is where cryptocurrency like Bitcoin originated and helped to popularize distributed ledger technology (DLT). It removes the problems that come with centralization, including less security and transparency. DLT doesn't store information in any one place, instead distributing it across a peer-to-peer network. Its decentralized nature requires some method for verifying the authenticity of data. That method is a consensus algorithm whereby participants in the blockchain reach an agreement on the current state of the ledger. Proof of work (PoW) and proof of stake (PoS) are two common consensus methods. Public blockchain is non-restrictive and permissionless, and anyone with internet access can sign on to a blockchain platform to become an authorized node. This user can access current and past records and conduct mining activities, the complex computations used to verify transactions, and add them to the ledger. No valid record or transaction can be changed on the network, and anyone can verify the transactions, find bugs or propose changes because the source code is usually open source. One of the advantages of public blockchains is that they are completely independent of organizations, so if the organization that started it ceases to exist the public blockchain will still be able to run, as long as there are computers still connected to it.

Private Blockchain

A blockchain network that works in a restrictive environment like a closed network, or that is under the control of a single entity, is a private blockchain. While it operates like a public blockchain network in the sense that it uses peer-to-peer connections and decentralization, this type of blockchain is on a much smaller scale. Instead of just anyone being able to join and provide computing power, private blockchains typically are operated on a small network inside a company or organization. They're also known as permissioned blockchains or enterprise blockchains. The controlling organization sets permission levels, security, authorizations and accessibility. For example, an organization setting up a private blockchain network can determine which nodes can view, add or change data. It can also prevent third parties from accessing certain information.

Hybrid Blockchain

Sometimes, organizations will want the best of both worlds, and they'll use hybrid blockchain, a type of blockchain technology that combines elements of both private and public blockchain. It lets organizations set up a private, permission-based system alongside a public permissionless system, allowing them to control who can access specific data stored in the blockchain, and what data will be opened up publicly. Typically, transactions and records in a hybrid blockchain are not made public but can be verified when needed, such as by allowing access through a smart contract. Confidential information is kept inside the network but is still verifiable. Even though a private entity may own the hybrid blockchain, it cannot alter transactions. When a user joins a hybrid blockchain, they have full access to the network. The user's identity is protected from other users, unless they engage in a transaction. Then, their identity is revealed to the other party. One of the big advantages of hybrid blockchain is that, because it works within a closed ecosystem, outside hackers can't mount a 51% attack on the network. It also protects privacy but allows for communication with third parties. Transactions are cheap and fast, and it offers better scalability than a public blockchain network.

Consortium Blockchain

The fourth type of blockchain, consortium blockchain, also known as a federated blockchain, is similar to a hybrid blockchain in that it has private and public blockchain features. But it's different in that multiple organizational members collaborate on a decentralized network. Essentially, a consortium blockchain is a private blockchain with limited access to a particular group, eliminating the risks that come with just one entity controlling the network on a private blockchain. In a consortium blockchain, the consensus procedures are controlled by preset nodes. It has a validator node that initiates, receives, and validates transactions. Member nodes can receive or initiate transactions. A consortium blockchain tends to be more secure, scalable, and efficient than a public blockchain network. Like private and hybrid blockchain, it also offers access controls.

Blockchain Consensus Algorithms

While these are the four main types of blockchain, there are also consensus algorithms to consider. In addition to PoW and PoS, anyone planning to set up a network will also want to consider the other types, available on different platforms like Wave and Burstcoin. For example, leased proof of stake allows users to earn money from mining, without the node needing to mine itself. Proof of importance uses both balance and transactions to assign significance to each user. Ultimately, blockchain technology is becoming more popular and rapidly gaining enterprise support. Every one of these types of blockchain has a potential applications that can improve trust and transparency and create a better record of transactions.