Types of blockchain network
The most essential role of the blockchain technology is to provide a secure way of exchanging information or to process vast amounts of transactions. However, different cases demand specific use of distributed ledger technology (DLT).
Firstly, focus on similarities of every type of blockchain share. There are three main characteristics:
- Every blockchain is based on a peer-to-peer network system, so every node is communicating in a decentralized way.
- Shared ledger is being periodically updated and every node has a copy.
- Each node is able to initiate or receive transactions and also create blocks.
Let’s start with the example of Bitcoin, a cryptocurrency which implemented blockchain technology into the mainstream. Bitcoin is a digital currency which network type is public, as people from all over the world might trade Bitcoins, become a node or verify other nodes as well. Literally, everyone who has access to the Internet can be a part of public blockchain network. Generally, a node or a user of public blockchain network is authorized to explore past and current records, verify transactions or do mining. More information regarding miners will be attached to next sections. Example: Bitcoin, Ethereum
- Slow – a huge network with a lot of nodes demands a lot of time to verify a transaction
- Scalability – slower rate of processing transactions creates issues with the scale. The more we try to develop the size of the network, the slower it will get. However, new solutions for that case are being currently created. We shall present more of them in next sections.
- Secure – the larger the network, the greater the ledger distribution. With size, it gains immunity to cyberattacks
- Transparency – the ledger is open and the data is visible for every participant of the network
- Trust – users can trust public blockchain without knowing the individual node
A private type of blockchain technology is a blockchain functioning only in a closed network. It may be used by enterprises where only selected participants are part of a blockchain network. In this case, security, permissions and accessibility are controlled by a specific organization. We can say that private blockchains are similar to public blockchains but they are being used by smaller group. Private blockchains are being used for supply chain management, digital identity or asset ownership. Example: Hyperledger
- Limited trust – restricted participants require trust building
- Low security – the same as in the case of participants, there are less nodes
- Centralization – need of system for accessing
- Scalability – enterprise can decide about the size of blockchain network
- Speed – definitely faster than a public blockchain
A hybrid type of blockchain has features of both private and public blockchain. With hybrid network, for example: user can control who gets access to data, however, only a selected part of data can be publicly accessible. This type of blockchain is flexible so there is even a possibility that users can join a private network with multiple public blockchains. In this case, transactions in a private network are verified by that network, nevertheless, users are able to release the transaction in the public blockchain. The public aspect demands more nodes for verification so transparency and security is increased. Example: Dragonchain
A consortium blockchain is a semi-decentralized technology where there is more than one organization which manages a blockchain network. So it works exactly like a private type of blockchain but more than one organization might participate as a node and exchange information. Consortium blockchains are being used by banks or government organizations. Example: Energy Web Foundation