Blockchain Technology Explained
Blockchain technology is taking over the digital world. We accept that it is a sophisticated technology, and there are various elements within the system that need explanation. That is why today we’ll explain all the properties and features that distinguish blockchain.
Why Do We Need Different Types of Blockchain?
When blockchain was introduced to the world, it was a public blockchain type with a cryptocurrency use case. Technology is evolving so much that even big brands like Gucci, Tesla, and Porsche are accepting cryptocurrency as a form of payment. You can literally buy almost anything with cryptocurrency nowadays. Basically, blockchain provides the concept of decentralized ledger technology. It gave organizations the ability to work without depending on any centralized entity.
Distributed technology solves the limitations of centralization. Although it also creates a lot of other problems to solve when it comes to applying blockchain technology to different aspects. In general, bitcoin used an inefficient consensus algorithm that is Proof-of-Work. It required the nodes to solve mathematical calculations using energy. In the early days, it was not a problem. But as soon as the difficulty increased, the time and energy required to solve those mathematical equations also increased. This inefficiency makes it not suitable for any system that needs to stay efficient no matter what. For example, banks deal with a large number of transactions every day. So, this blockchain type is not suitable for it.
There are four different major types of Blockchain technologies.
What is a Private blockchain?
A private blockchain is a permissioned and restrictive blockchain that works in a closed network. These are the most appropriate for enterprises and organizations that need to utilize Blockchain just for inside employment. Also, nobody can enter this kind of organization without appropriate validation. Recently such Blockchains have gained a lot of importance as they help secure companies’ sensitive information.
Advantages of Private Blockchain
- This network allows you to execute with the lowest possible fees, and most importantly, you may not even need a fee to start with most of the time.
- Private blockchains are more productive, and this is because they have fewer members, which means they can move more quickly.
- Private Blockchain does not offer any scope for any unauthorized/third party to enter the network, making it safer and dependable.
- Since it has restricted users, private blockchains are not decentralized as much as a typical open-source blockchain.
- They can be a target for hackers since they only have to collude with fewer nodes.
- It is a trust-based system since nodes will have to trust each other to share sensitive information with each other.
Use-Cases of Private Blockchains
Real Estate – The real estate market is unquestionably stressful because of divided tasks, criminal activities, monotonous paperwork, money expenses, and the chance of misrepresentation. Private blockchain companies can help real estate sectors by offering people ownership, getting installments, and disposing of any hidden criminal issues.
Insurance – These sectors deal with complicated agreement issues, deceitful claims activity, third-party transactions, and handling tremendous data. Private Blockchains offer quicker and better access that prompts smoother cooperation among backup plans and their clients. In addition, technology can assist to automate the entire insurance claim process, saving the burden of waiting in line.
Healthcare – In this blockchain organizations can assist with keeping up with patients’ secrecy and offer access to doctors. Additionally, blockchain technology can be productive for assuring integrity in the drug supply chain, including tracking and tracing, also the ideas of provenance.
What is a Public Blockchain?
Public Blockchain is ‘open’ for everyone. You can consider it for individuals. Anyone can join & read / write/audit the public blockchain. It is openly accessible free of charge. It brings transparency to the data or transactions that happen in the blockchain because anyone can review the blockchain.
To write in the blockchain, one has to do some work, but if you adhere to the rules of protocol there is nothing to stop you from joining and participating in the public network.
Also, public blockchains are built on incentive systems that reward fair behavior and punish unjust behavior.
Advantages of Public Blockchain
- Public Blockchain is available for individuals who want to join, regardless of hardware, location, and internet speed, among others. All the benefits of the technology will be open to you. Here, transactions get completed sooner as there’s a level of trust between users.
- All users won’t have a set of guidelines to follow, simply because there isn’t one. The open-ended environment allows users to do what they want in the public Blockchain. True decentralization is achieved, and it forms a distributed ledger system that promotes fairness to everyone involved.
- A feature for those who value their privacy. If you’re always using a VPN when browsing the internet, then you’ll feel right at home with a public Blockchain system.
- In a public Blockchain environment, the word ‘join’ is actually superficial. You’re not required to enter your name, address, or anything that could identify you in real life.
- A public Blockchain will still have security measures installed, one that prevents other people from disrupting the network or the service it provides.
- Some public blockchain like Bitcoin uses a Proof of Work consensus mechanism where the participants need to solve a complex mathematical puzzle to validate a transaction. It requires the consumption of a lot of resources which is a costly affair.
- In public blockchains, one doesn’t need to prove his/her identity and just commit your processing power to become a part of the network.
- One of the biggest problems with some public blockchains is speed. bitcoin process only 4. 6 transactions per second whereas companies like Visa process 1700 transactions per second.
Use-Cases of Public Blockchains
Voting: Governments can do voting through public blockchain employing transparency and trust.
Fundraising: Companies can make use of the public blockchain for improving transparency and trust.
What is Consortium Blockchain?
As the name suggests, a consortium blockchain is such that is managed by two or more individuals, associations, companies, or business outfits. It is an innovative way to solve organizations’ needs where there is a need for both public and private blockchain features.
In such type of Blockchain:
- Members of the consortium can run a full node and start mining.
- Members of the consortium can make transactions on the chain.
- Members of the consortium can use review/audit the blockchain in a Blockchain explorer.
Advantages of Consortium Blockchain
- Consortium blockchains are more secure and have better scalability.
- Works with well-defined governance structures.
- It offers better customizability and control over resources.
- It is also more efficient compared to public blockchain networks.
- It offers access controls.
- It is less transparent.
- Even though it is secure, the whole network can be compromised due to the member’s integrity.
- Regulations and censorship can have a huge impact on network functionality.
- It is also less anonymous compared to other types of blockchain.
Use Cases of Consortium Blockchain
𝐑𝐞𝐬𝐞𝐚𝐫𝐜𝐡 𝐃𝐚𝐭𝐚 – A consortium blockchain can be used to share research data and results.
𝐅𝐨𝐨𝐝 𝐭𝐫𝐚𝐜𝐤𝐢𝐧𝐠 – It is also great for food tracking.
𝐁𝐚𝐧𝐤𝐢𝐧𝐠 𝐚𝐧𝐝 𝐩𝐚𝐲𝐦𝐞𝐧𝐭𝐬 – A group of banks can collaborate and create a consortium. They can decide on the nodes that will validate transactions.
What is Hybrid Blockchain?
It is one of the various sorts of blockchain technology. Usually in general people consider this a consortium blockchain, but to be honest it is not. But, there are a few similarities between them. Basically, this blockchain is a combination of both private and public blockchains. It has use cases in an association that neither needs to send a private blockchain nor a public blockchain and essentially needs to convey the two universes’ ideal.
In simple words, If you’re looking to get all the advantages of both private and public blockchains with minimal disadvantages, you should go for a hybrid blockchain.
Advantages of Hybrid Blockchain
- It gives authority to work in a closed ecosystem without making everything public
- As per the necessities, rules can be changed
- Such types of networks are additionally invulnerable to 51% of attacks.
- It offers security while still being associated with a public organization
- It offers great versatility contrasted with the public organization
- Such technology isn’t completely transparent.
- Upgrading to the hybrid blockchain can be a challenge.
- There is no motivation for taking an interest and adding to the organization.
Use cases of Hybrid Blockchain
𝐑𝐞𝐚𝐥 𝐞𝐬𝐭𝐚𝐭𝐞 – We can use hybrid networks for real-estate purposes where real-estate companies can utilize it to run their frameworks and utilize public to show information to the public.
𝐑𝐞𝐭𝐚𝐢𝐥 – Retail can also use the hybrid network to streamline its processes.
𝐇𝐢𝐠𝐡𝐥𝐲 𝐫𝐞𝐠𝐮𝐥𝐚𝐭𝐞𝐝 𝐦𝐚𝐫𝐤𝐞𝐭𝐬 – Hybrid blockchains are also ideal for highly regulated financial markets.
We hope that after reading this blog, you have a basic understanding of different blockchains. Although, if you are an organization and want to use blockchain without making everything open to the community, it is a good idea to choose private blockchain. Furthermore, if you want more transparency in your network, a public platform is a good option. However, they are not well suited for enterprise use cases.
Also, if you are a beginner and want to understand how blockchain works, we recommend you read our last blog: Understanding blockchain beyond cryptocurrencies and NFTs