Bitcoin was not only the first ever Bitcoin to be created but also the first of its kind to use a technology known as blockchain to securely record transactions and keep a history of every trade. This blockchain technology has now been adopted by thousands of different types of cryptocurrencies; for example, it is used to make an Ethereum trade which is another popular crypto coin. There are four main types of blockchain technologies that supplement cryptocurrency. These are public blockchains, private blockchains, hybrid blockchains, and consortium blockchains. Below we will discuss each type and compare them to see what the main differences are between them.
The type of blockchain on this is the public blockchain that the most famous cryptocurrency, Bitcoin, uses. It was bitcoins use of this new technology at the time to provide safe and secure transactions that popularized the use of blockchain technology.
The way in which a public blockchain works is by storing information and data to do with transactions in a decentralized manner which is spread across what is known as a peer-to-peer network. Because this type of blockchain technology is decentralized, there needs to be ways to verify that the data stored is authentic. This is where things known as proof of stake and proof of work come in, which allow participants on the blockchain to agree to complete these consensus methods in order to verify the authenticity of the information on the blockchain.
With public blockchains, anyone with access to the internet can sign onto the blockchain without any requirement for permission. It is completely non-restrictive, and users can immediately see all past and current records and begin the mining process. Some advantages of public blockchains are that they are very transparent and regarded as being quite secure. There are, however, some downsides to public blockchains. There is a tendency for this type of blockchain to run a little slower than others and it will slow down over time as more people join it.
The next type of blockchain technology on this list is the private blockchain which, unlike the public blockchain, can restrict access and only let certain participants join. A private blockchain usually comes in the form of a closed network, or one managed by an individual entity. Just like the public blockchain, private blockchains still use decentralization as well as peer-to-peer connections; however, it is on a scale that is a lot smaller. To access a private blockchain, you will need to be given permission to join. These blockchains are often used by a single organization or company that wants to limit who can use them so they can manage them properly.
One advantage of a private blockchain is the increased security that limits who can access it and create different levels of permission so that only certain individuals are allowed to change, add or view data. Preventing third parties from being able to access the information on a private blockchain also helps to improve the security of the data stored on it.
A disadvantage of private blockchains is that some people say that because they are private, they aren’t necessarily considered blockchains. This is because the main philosophy behind blockchains is that they should operate in a fully decentralized manner which isn’t the case with private blockchains. In private blockchains, there are usually a few centralized nodes that control what is considered valid on the blockchain. This has the potential to be a security risk as it only takes some of the nodes to start falsifying information which can compromise the consensus methods used to authorize data on the blockchain.
Because the number of people that can access private blockchains is restricted, there isn’t the same problem of networks slowing down over time as more and more people join them. Instead, the number of people on the network is limited and controlled, which can allow for much faster transaction speeds which is a huge advantage for the use of this type of blockchain technology.
It is quite common for companies or organizations to want the benefits of both types of blockchain technologies. This is where hybrid blockchains come in. These types of blockchains integrate features from both private blockchains as well as public blockchains. The way in which hybrid blockchains work is by allowing companies or organizations to create two different networks, a private one where permissions are required for access and a public network in which permissions are not needed to gain access. These are especially useful for organizations that want to monitor especially sensitive data and information but also want the freedom and transparency that comes with public blockchains so that a wider cohort of people are able to store their data on it.
Transaction data in a hybrid blockchain is not usually available to the public, but verification can be carried out when required. This is usually done through something known as a smart contract. It should be said that although a hybrid blockchain can be owned by a single entity, the information around transactions stored on the blockchain cannot be changed or altered.
The fourth type of blockchain technology is known as consortium blockchain. It has some similarities to the hybrid blockchain as there are both public and private features, but the main way that makes it different is the fact that several members of an organization can collaborate on the network. It functions as a private blockchain where access is limited to a certain group.
The advantages of this type of blockchain are that they are generally considered more secure as well as a lot more efficient, especially when compared to a public blockchain. Another advantage is that access to controls can be managed. A disadvantage of the consortium blockchain is that it isn’t as transparent as public blockchains. It also has a security risk if a node that is a member becomes compromised, which can give someone access to affect the function of the network.