The Types of Blockchains and Why We Need Them

Blockchain is a data storing method such that it is difficult or impossible to alter, hack, or defraud. A blockchain is a record of transactions that is copied and distributed throughout the blockchain’s complete network of computer systems digitally. It is able to carry out secure transactions, lower compliance costs, and accelerate data transfer processes. Blockchain technology is frequently utilized for operations due to the multiple benefits that users may experience while using it, such as immutability, increased security, automation, decentralization, and authentication. As a result, corporations must be aware of the different types of blockchains, in order to advance their workplaces as well as in order to be able to effectively compete in the corporate world.

Read: The Importance of Data in Making Business-driven Decisions

Types of blockchains

Here are the different types of blockchains and their uses you must know about before employing one for operation:

1. Public blockchain

A public blockchain is one of the several types of blockchains that allows you to promote distributed ledger technology is the public blockchain (DLT). Although it is decentralized, it has a lower level of security and transparency. It is critical to understand that the DLT does not store data in a single location, but rather distributes it throughout a network. It does, however, require you to use a consensus technique to authenticate the data’s legitimacy. Anyone with internet connectivity may join a blockchain platform and become an authorized node, making public blockchain non-restrictive and permissionless. This user has access to current and historical data, as well as the ability to perform mining operations, which are sophisticated calculations needed to validate transactions and add them to the ledger. On the network, no legitimate record or transaction may be modified, and anybody can check transactions, report issues, or propose improvements because the source code is typically open source, implying that the data is less secure.

Needs

The most popular use of public blockchains is cryptocurrency mining and exchange. However, public blockchains are also commonly used in situations where openness and trust are necessary, or where data must be accessible to a large number of users, and manually issuing security keys for each of them is impractical.

2. Private blockchain

A private blockchain is one that operates in a restricted context, such as a closed network, or is controlled by a single entity, among the several types of blockchains. Although, because of peer-to-peer connectivity and decentralization, this sort of blockchain functions similarly to public blockchains, it runs on a much smaller scale. One of the advantages of using this kind is that instead of everybody with an internet connection having access to the Blockchain, it is often run for an organization, resulting in permissioned or enterprise blockchains.

Needs

This form of blockchain is most commonly utilized when the data owner wants to keep it safe. Supply chain management, asset ownership, and internal voting are a few examples of other applications for private blockchain.

3. Hybrid blockchain

As the name implies, a hybrid blockchain combines characteristics of both public and private blockchains. The hybrid blockchain allows users to establish a system that allows them to create a permission-based system for personal use and a permissionless system for public usage. They may, however, manage who has access to the data and what data they wish to make available to the public. In a hybrid blockchain, transactions and data are often not made public, but they may be validated when necessary. Inside the network, confidential information is kept secure yet still verifiable. Unless they participate in a transaction, the user’s identity is hidden from other users after which, their true identity is exposed.

Needs

Companies can utilize a hybrid blockchain to run systems securely while exposing some information to the public, such as listings. This sort of blockchain may be used by a head organization to keep data confidentiality while simultaneously securely sharing it with institutions under it.

4. Federated blockchain

The public and private blockchains’ characteristics are combined in the federation blockchain. Multiple people join a decentralized network utilizing this form of blockchain. It is essentially a private blockchain with restricted access to a specific group, removing the hazards associated with a private blockchain controlled by a single business.

Needs

This type of blockchain is ideal for being employed for the operations of supply chains such as banking and payments.

The aforementioned are the four different types of blockchains that you must be aware of. If you are new to blockchains, they will undoubtedly help you acquire a better grasp of them. Or else, they will surely assist you to make a quick decision about which out of the four will be the best for your work.

Read: Is the Future Bitcoin, or Blockchain?

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