The crypto, NFT, and Web3 industries use four primary types of technologies.
You may have heard the phrase “blockchain” mentioned in a discussion about the future of technology, on social media, in online news articles on cryptocurrencies, or in another context. Briefly explained, blockchain acts as a shared, permanent digital record of data (such as transactions) kept on computers or servers.
Advantages of blockchain
By definition, blockchain and cryptocurrencies go hand in hand since cryptocurrencies require blockchain technology to function. Although they are not the same, the blockchain technology that powers cryptocurrencies has a number of advantages, including the following:
- efficiency, and cost-cutting.
4 different types of blockchain
A public blockchain is permissionless, which means that anyone can join in it and that it is completely decentralised. As a result, anyone with access to the internet can access, download, and join the blockchain as a legitimate node. The blockchain’s nodes all have equal access to and ability to communicate with one another. This form of blockchain is frequently utilised for cryptocurrency trading and mining. The proof-of-work and proof-of-stake consensus techniques are the two that are most frequently utilised in public blockchains.
ADVANTAGES OF A PUBLIC BLOCKCHAIN:
- Accessible to everyone: Anyone may use the network.
- Pseudonymous: Participation is permitted without disclosing your identity.
- Decentralised: The network is not maintained by a single organisation.
- Transparent: By allowing anybody full access to the ledger at any moment, corruption and inconsistencies within the network are completely eliminated.
- Immutability: It is nearly impossible for anyone to alter or manipulate the blockchain once blocks have been added and produced.
- Rewards: Depending on the consensus process, you can receive rewards as a miner or validator by finding new blocks or by verifying transactions on the blockchain network.
THE DRAWBACKS OF A PUBLIC BLOCKCHAIN:
- Unsuitable for sensitive or proprietary data: a public blockchain lacks user permission systems that would allow for the concealment of data from specific individuals, groups, or the general public. For instance, if the blockchain is required to store private financial or medical information, anyone in the world would be able to access it.
- Problems with scalability: These networks may get sluggish, congested, and expensive. Because anyone can use a public blockchain to transmit and receive transactions (data), blocks can only carry a certain amount of data before the network becomes congested. It might take a while for transactions to be executed on a blockchain when there is a lot of activity, and network costs can soar.
- Public blockchain examples include Bitcoin and Ethereum.
A private blockchain is “permissioned,” which means that only specific individuals are permitted to use it. This type of blockchain is managed by a business or organisation, which chooses who receives access and grants permissioned users on the network read and write access. Due to its constrained setting, private blockchains are typically smaller in size. A private blockchain operates as a result within the network of the controlling entity.
THE ADVANTAGES OF A PRIVATE BLOCKCHAIN:
- Privacy: In private blockchains, the secrecy, security, and privacy of all the data held within the system are given top priority.
- Scalability and speed: The system can accommodate more transactions per second and speed up decision-making with fewer nodes and players that have control over the network.
- Security: In contrast to public blockchains, private blockchains have strict verification requirements for participants, making them far safer from illicit activity.
THE DRAWBACKS OF A PRIVATE BLOCKCHAIN:
- Private blockchains are not entirely decentralised: they rely on a centralised system and third-party administration tools.
- Examples include: Hyper-ledger Fabric and Ripple’s RippleNet.
A blockchain network that incorporates elements of both public and private blockchains is known as a hybrid blockchain. One organisation has power over the blockchain network. It gives an organisation control over what information will be accessible to the public and who will be able to access specific data stored on the blockchain.
For instance, XinFin‘s hybrid blockchain technology enables it to address any underlying issues in the banking and international trade industries thanks to its hybrid blockchain technology.
There are public and private states in the existing blockchain infrastructure. While the public state makes data open and verifiable, XinFin’s private state ensures that sensitive financial data is kept secure.
A hybrid blockchain has been employed by Xinfin for remittance, peer-to-peer trading platforms, blockchain-powered insurance, and online digital asset-linked identity, demonstrating its adaptability and many use cases.
Members of the hybrid blockchain can also determine which transactions are made public and who is allowed to participate in the blockchain.
ADVANTAGES OF A HYBRID BLOCKCHAIN:
- Closed ecosystem: This type of blockchain operates in a closed ecosystem, enabling the maintenance and verification of private information within the network while preventing access to it from the outside.
- Hybrid blockchain offers a flexible mechanism: for altering the ledger in accordance with your needs and the needs of the network.
- Privacy with communication: While still allowing third-party communications, particularly to shareholders and the general public, the hybrid blockchain shields users from privacy-related difficulties.
- Better scalability: Because it only requires a small number of nodes to validate transactions, this blockchain’s scalability may be superior to that of public blockchains.
THE DRAWBACKS OF A HYBRID BLOCKCHAIN:
- Lack of transparency: This blockchain lacks transparency since occasionally it is impossible to retrieve the information recorded.
- Absence of incentives: Unlike miners on a public blockchain, users of this network won’t receive compensation for their contributions to the blockchain.
- Sluggish upgrades: This network may have trouble with development and upgrades. It lacks the authority to go through the difficult and drawn-out adoption process.
- Examples include: XinFin and IBM Food Trust.
More decentralised than a private blockchain is a consortium blockchain or federated blockchain. A consortium blockchain is created by a collection of several entities who desire to operate together on a decentralised network, as opposed to a hybrid blockchain with one controlling entity. The blockchain network cannot be accessed by users outside of the consortium.
R3, one of the most significant systems utilising the consortium blockchain, has Fortune 500 organisations among its members. The goal of R3’s network is to encourage international cooperation between businesses through methods like developing apps that use their network.
ADVANTAGES OF A CONSORTIUM BLOCKCHAIN:
- Security: Only those who are a part of this network can access the information on the chain; it is not accessible to the general public.
- Power: Multiple authorities share control over this blockchain. Instead, the blockchain is under the jurisdiction of a specific number of legitimate network users.
- Validation: The number of participants on this blockchain is known and validated. To lessen the dangers of data and privacy issues, authentication is done.
- No transaction fee: Unlike other blockchains, this network does not charge its users any service or transaction fees.
THE DRAWBACKS OF A CONSORTIUM BLOCKCHAIN:
- Framework: Because of its concentrated network structure and absence of a uniform framework, this blockchain is susceptible to players who are covertly corrupt.
- Slow upgrade: On this network, upgrading the protocols is frequently a difficulty when there is a rise in participants.
- Lack of cooperation: This blockchain’s development speed also depends on participant cooperation, and if participants can’t come to an agreement, progress will be slowed.
- Example: Energy Web’s Consortia Chain • R3