Learn about the different types of blockchain

 Blockchain technology is one of the most important inventions of recent times, there are different types of Blockchain. 

With its great entry on the scene thanks to the birth of bitcoin, the idea of ​​a blockchain that went beyond the use case of P2P money quickly arose. 

Blockchain is an instrument of technological transformation, open source software that anyone can view and even adapt for their own use.

In its beginnings, this network was only of interest to a group of people who saw in it the transformation and revolution that it would bring. 

However, as it gained more notoriety, it stopped being a tool for a few and became a technology that attracts individuals, companies, and governments alike.

In order to provide increasingly better services and meet the demands of all its users, the creation of different types of blockchain development services originated. 

There are mainly 3 types that arise with the introduction of blockchain technology to the world.

1. Public blockchains

2. Private or permissioned blockchains

3. Hybrid or federated blockchains 

The 3 types of blockchain 

In principle, two main types of blockchain can be distinguished: the public blockchain and the private blockchain. 

Before describing them, it must be clarified that these blockchains do not compete with each other, but rather each one provides different things.  

Public blockchains allow you to operate openly. This means that any user can access them, the only thing you need is to have an internet connection. 

Private blockchains, for their part, operate with a closed network intended for a group of users who have been previously accepted by a central administrator.

Both networks use permission or consensus algorithms to validate the transactions that are made.                                                 

A third type is generated from the combination between private blockchains and public blockchains: hybrid or federated blockchains. 

These networks apply the technology of a private blockchain but store the hash of the blocks in a public blockchain.

Below we will explain these three variants in depth: their advantages and disadvantages.

The public blockchain

It was the first type of blockchain that existed. 

The public blockchain allows anyone to be part of it. Whether as a user, miner or node administrator, individuals can access and integrate into the network without any restrictions. 

For the most part, public blockchains are used for those applications that are open to the general public, in which transparency and total decentralization are needed.

Ethereum and Bitcoin are examples of public networks. 

Some advantages of this type of blockchain are:

Transparency : each user can see and acquire copies of the transactions that are distributed among them.

Accessibility : All people can be part of the network of nodes and access all transaction history and information.

It is a decentralized and censorship-resistant network : As they are public networks, everyone who participates in them has the same rights. There are no positions of power or users who have special positions. Consequently, neither the networks nor the recorded transactions can be canceled, closed or altered. 

Security:  No one has access to change or manipulate any data once it has been registered.

However, these networks also have some disadvantages that must be kept in mind:

Energy consumption is high : The energy costs for the operation of these networks are high and harmful to the environment. This difficulty is experienced especially by networks that use Proof of Work (PoW) . 

Transactions can be traceable : since they are public networks, both the movements and the transactions made are visible. If a wallet is directly associated with a participant, it could be tracked. 

While in many cases this is not a problem since the wallets are anonymous, this is a major disadvantage for enterprise blockchain use cases.

Commissions must be paid:  Miners need remuneration in exchange for securing the network. So users who want to make a transaction will have to pay a commission that is for these miners.

The private or permissioned blockchain

Private blockchains only authorize participants who have already been invited to the network before. 

That is, a central administrator is the one who decides who can be part of the network and carry out transactions or create blocks within said network. It is important to highlight that the operations or transactions carried out are validated by the participants themselves.

The economic maintenance of this network generally depends on the company that supports the project. Private blockchains often do not have cryptocurrencies or mining actions.

Some examples are: Blockstack, Multichain, Ripple, among others.

Some advantages of private blockchains:

Higher performance : Private networks are smaller than public blockchains. For this reason they have better performance, a higher transaction resolution speed and a network with greater reach.

A trusted network : in public networks the participants are anonymous. On the other hand, in private blockchains each user is identified. This generates a higher level of trust.

No commissions:  Block-creating participants do not do so for economic incentives but to be part of the network, so they do not require payment in the form of cryptocurrencies. This means that users do not pay fees for using private blockchains.

These networks are very beneficial in the case of organizations, companies or businesses that need to have limited and controlled access to records. 

This type of permissioned blockchain model offers the possibility of optimizing some processes, including:

Digital Identity management: which is essential for most industry use cases.

Tracking physical items: which helps with inventory and supply chain management that often causes companies to lose billions of dollars.

The audit: Blockchain technology enables the automation of tracking access to information/record, establishing controls over required permissions and regulating who sees the information.

Privacy management in the medical sector : an encrypted information system is perfect for shielding medical records and thus protecting the privacy of patients.

However, private blockchains have some disadvantages:

They are not decentralized: As they are not decentralized, the records are closed access and are managed by one or several organizations or entities as appropriate.

The hybrid or federated blockchain

Hybrid blockchains appear from the combination of a private and a public blockchain.

This network is a regular permissioned blockchain but with the difference that a reference of each block (hash) is stored in a public blockchain. 

In hybrid blockchains, people also need permission to enter it and execute different functions within it.  

These networks are not as popular as public and private networks, but they are ideal for companies, organizations or businesses looking to acquire an additional layer of security.

Federated blockchains are faster (they have greater scalability) and provide more privacy in transactions.

This type of blockchain attempts to eliminate the complete autonomy of a single entity over a network. A group is in charge of federated blockchain operations. It is the companies or individuals represented that make the decisions for the entire network. These groups are called consortia or federations.

A use case for these blockchains is the banking sector and the energy sector.

The consensus process is controlled by a group of preselected nodes. For example, a group of 15 financial institutions, in which each operates a node and of which, 10 must sign each block for the block to be valid.

The goal of applying this blockchain development company  model is to maintain a high level of transparency and trust.

Another perfect use case is what is happening in the healthcare sector, where blockchain is beginning to be used to store data from its drug production lines. 

The stored data can be reviewed by the competent authority in order to control quality, both at the level of the company itself and at the government. 

Some examples of federated blockchains are: B3i, EWF and R3.

These are some of its benefits:

Simplifies processes : Reduces transaction costs and data redundancy and replaces legal systems, simplifying document management and getting rid of semi-manual compliance mechanisms.

Privacy : As reading permissions are restricted, they provide a great level of privacy and control.

Reduces costs: As the network is distributed among different parties that show interest, operations are very fast, which leads to lower costs.