Blockchain technology is the name that has received a lot of attention from the computer science market recently. Why is that? Blockchain has become a favourite name of many investors and IT companies because of its widely used, and advantages. Its fever in the market has never cooled down but is increasing. We bet that there are many people among us who know about Blockchain, its features, and benefits. However, all we know is just a general understanding, now let’s accompany EBIZWORLD to learn more about this interesting technology.
There are many aspects that we need to consider when it comes to study, or to learn anything more seriously, so today let’s move to the first piece of the whole matter: Blockchain and its different types.
Public Blockchains
Public blockchains are permissionless in nature, allow anyone to join, and are completely decentralized. Public blockchains allow all nodes of the blockchain to have equal rights to access the blockchain, create new blocks of data, and validate blocks of data.
To date, public blockchains are primarily used for exchanging and mining cryptocurrency. You may have heard of popular public blockchains such as Bitcoin, Ethereum, and Litecoin. On these public blockchains, the nodes “mine” for cryptocurrency by creating blocks for the transactions requested on the network by solving cryptographic equations. In return for this hard work, the miner nodes earn a small amount of cryptocurrency. The miners essentially act as new era bank tellers that formulate a transaction and receive (or “mine”) a fee for their efforts.
Advantages: 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: The network can be slow, and companies can't restrict access or use. Public blockchains also don't scale well. The network slows down as more nodes join the network.
Private blockchains
Private blockchains, which may also be referred to as managed blockchains, are permissioned blockchains controlled by a single organization. In a private blockchain, the central authority determines who can be a node. The central authority also does not necessarily grant each node with equal rights to perform functions. Private blockchains are only partially decentralized because public access to these blockchains is restricted. Some examples of private blockchains are the business-to-business virtual currency exchange network Ripple and Hyperledger, an umbrella project of open-source blockchain applications.
Advantages: The controlling organization sets permission levels, security, authorizations and accessibility. For example, an organization setting up a private blockchain network can determine which nodes can view, add or change data. It can also prevent third parties from accessing certain information. Because they're limited in size, private blockchains can be very fast and can process transactions much more quickly than public blockchains.
Disadvantages: The disadvantages of private blockchains include the controversial claim that they aren't true blockchains, since the core philosophy of blockchain is decentralization. It's also more difficult to fully achieve trust in the information, since centralized nodes determine what is valid. The small number of nodes can also mean less security. If a few nodes go rogue, the consensus method can be compromised. Additionally, the source code from private blockchains is often proprietary and closed. Users can't independently audit or confirm it, which can lead to less security. There is no anonymity on a private blockchain, either.
Hybrid blockchains
Hybrid blockchains are blockchains that are controlled by a single organization, but with a level of oversight performed by the public blockchain, which is required to perform certain transaction validations. An example of a hybrid blockchain is IBM Food Trust, which was developed to improve efficiency throughout the whole food supply chain.
Advantages: 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: 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.
Consortium Blockchains
Consortium blockchains are permissioned blockchains governed by a group of organizations, rather than one entity, as in the case of the private blockchain. Consortium blockchains, therefore, enjoy more decentralization than private blockchains, resulting in higher levels of security. However, setting up consortiums can be a fraught process as it requires cooperation between a number of organizations, which presents logistical challenges as well as potential antitrust risk (which we will examine in an upcoming article). Further, some members of supply chains may not have the needed technology nor the infrastructure to implement blockchain tools, and those that do may decide the upfront costs are too steep a price to pay to digitize their data and connect to other members of the supply chain.
Advantages: A consortium blockchain tends to be more secure, scalable and efficient than a public blockchain network. Like private and hybrid blockchain, it also offers access controls.
Disadvantages: Consortium blockchain is less transparent than public blockchain. It can still be compromised if a member node is breached, the blockchain's own regulations can impair the network's functionality.
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