Types of Blockchain Networks and Their Use Cases (Advantages and Disadvantages)

There a basically four types of blockchain networks currently and in this article we’ll cover those four types of blockchains, their advantages, disadvantages and their use cases. but before then, let’s see what blockchain is.

 

What is Blockchain?

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. A blockchain is essentially a digital ledger of transactions that is duplicated and distributed across the entire network of computer systems on the blockchain. In more simpler and concise terms, a blockchain is a decentralised storage system.

 

 

Types of blockchain Network

Types of Blockchain Networks and Their Use Cases (Advantages and Disadvantages)

1. Public blockchain

How Public blockchain works

The first type of blockchain technology is a public blockchain. This is where cryptocurrencies 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. Two standard consensus methods are proof of work (PoW) and proof of stake (PoS).

A 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 description 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.

 

 

Advantages of Public Blockchain Network

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.

 

Another advantage of public blockchains is the network’s transparency. As long as the users follow security protocols and methods fastidiously, public blockchains are mostly secure.

Disadvantages of Public Blockchain Network


The network can be slow, and companies can’t restrict access or use. If hackers gain 51% or more of the computing power of a public blockchain network, they can unilaterally alter it, Godefroy said.

Public blockchains also don’t scale well. The network slows down as more nodes join the network.

 

 

Use cases of Public Blockchain Network

The most common use case for public blockchains is mining and exchanging cryptocurrencies like Bitcoin. However, it can also be used for creating a fixed record with an auditable chain of custody, such as electronic notarization of affidavits and public records of property ownership.

This type of blockchain is ideal for organizations that are built on transparency and trust, such as social support groups or non-governmental organizations. Because of the public nature of the network, private businesses will likely want to steer clear.

 

 

2. Private Blockchain

How private blockchain works

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 permission blockchains or enterprise blockchains.

  • A blockchain network operates in a private context, such as a restricted network, or is controlled by a single identity.
  • While it has a similar peer-to-peer connection and decentralization to a public blockchain network, this Blockchain is far smaller.
  • They are often run on a small network within a firm or organization rather than open to anybody who wants to contribute processing power.
  • Permissioned blockchains and business blockchains are two more terms for them.

Advantages of Private Blockchain

  • Speed: Private Blockchain transactions are faster. This is because a private network has a smaller number of nodes, which shortens the time it takes to verify a transaction.
  • Scalability: You can tailor the size of your private Blockchain to meet your specific requirements. This makes private blockchains particularly scalable since they allow companies to easily raise or decrease their network size.

Disadvantages of Private Blockchain

  • Trust Building: In a private network, there are fewer participants than in a private network.
  • Lower Security: A private blockchain network has fewer nodes or members, so it is more vulnerable to a security compromise.
  • Centralization: Private blockchains are limited in that they require a central Identity and Access Management (IAM) system to function. This system provides full administrative and monitoring capabilities.

Uses of Private Blockchain

  • Supply Chain Management: A private blockchain can be used to manage a company’s supply chain.
  • Asset Ownership: A private blockchain can be used to track and verify assets.
  • Internal Voting: Internal voting is also possible with a private blockchain.

 

 

 

3. Hybrid blockchain

How Hybrid blockchain works

Organizations that want the best of both worlds use hybrid blockchain, as it’s 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.

 

Advantages of Hybrid blockchain

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.

 

Disadvantages of Hybrid blockchain

This type of blockchain isn’t completely transparent because information can be shielded. Upgrading can also be a challenge, and there is no incentive for users to participate or contribute to the network.

 

 

Use cases of Hybrid blockchain

Hybrid blockchain has several strong use cases, including real estate. Companies can use a hybrid blockchain to run systems privately but show certain information, such as listings, to the public. Retail can also streamline its processes with hybrid blockchain, and highly regulated markets like financial services can also see benefits from using it.

  • Medical records can be stored in a hybrid blockchain. The record can’t be viewed by random third parties, but users can access their information through a smart contract.
  • Governments could also use it to store citizen data privately but share the information securely between institutions.
  • Real Estate: Real-estate companies can use hybrid networks to run their systems and offer information to the public.
  • Retail: The hybrid network can also help retailers streamline their processes.
  • Highly Regulated Markets: Hybrid blockchains are also well-suited to highly regulated areas like the banking sector.

 

 

 

 

4. Consortium  or Federated Blockchain

How it works

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.

Advantages of Consortium Blockchain

A consortium blockchain tends to be more secure, scalable and efficient than a public blockchain network. Like private and hybrid blockchains, it also offers access controls.

 

 

Disadvantages of Consortium Blockchain

A consortium blockchain is less transparent than a public blockchain. It can still be compromised if a member node is breached, the blockchain’s own regulations can impair the network’s functionality.

 

Use cases of Consortium Blockchain

  • Banking and payments are two uses for this type of blockchain. Different banks can band together and form a consortium, deciding which nodes will validate the transactions. Research organizations can create a similar model, as can organizations that want to track food. It’s ideal for supply chains, particularly food and medicine applications. A consortium can be formed by a group of banks working together. They have control over which nodes will validate transactions.
  • Research: A consortium blockchain can be employed to share research data and outcomes.
  • Food Tracking: It is also apt for food tracking.

 

End Notes

In this article, we’ve covered different types of Blockchain networks, their use cases, the advantages and disadvantages of the different types of blockchain including their characteristics.




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