A blockchain is a digital ledger or a compilation of transactions in a sequential order. Once a blockchain network has verified a transaction, it becomes unmodifiable and immune to fraud or other criminal activities.
However, there are still some doubts as to the security and competency of blockchain networks. A decentralized system, transaction availability 24/7, and recorded transactions are just a few of what makes Blockchain technology alluring for business. The rise of blockchain technology cannot be denied, as the benefits of its application have become the subject of frequent discussions in businesses.
How Do Blockchains Work?
A blockchain is commonly referred to as a digital, shared database. The data recorded is called a “block.” Once verified by a consensus mechanism, blocks are added sequentially to a network’s data chain to form the blockchain.
With the help of cryptography principles, blockchains have enhanced network security, and transactions can be done quickly and directly between two parties without the help of intermediaries. Blockchains usually operate at lower rates because of the absence of intermediaries.
Blockchain Networks And Their Uses
Now that you know how blockchains work, it’s time to learn about the different kinds of blockchain networks. Below are blockchain networks that have varying uses depending on the needs of the user:
1. Public Blockchain Networks
Public Blockchain Networks are the very definition of decentralized and are permissionless, so anyone with internet access can interact freely within the blockchain. Most Public Blockchain Networks use Proof-of-Work or Proof-of-Stake as consensus mechanisms. Best examples of Proof of Work (PoW) blockchains include Bitcoin, Litecoin, and Dogecoin, while the best examples of Proof-of-Stake blockchains include Ethereum, Avalanche, and WEMIX3.0.
In a public blockchain, all transactions are visible to anyone in the network. Participants can conduct business transactions without cause for concern because there are protocols and mechanisms to ensure the transactions’ validity.
The only challenge a public blockchain faces is the amount of data filtering and verification required due to the number of participants in a network, which can sometimes slow down the transaction process and even raise fees.
2. Private Blockchain Networks
Companies or enterprises are the primary patrons of this type of blockchain network. Private Blockchain Networks are run on closed networks and are controlled by a single entity, making them only partially decentralized. A private blockchain network’s advantages include configuring permissions, data access, and authorization for functions across the blockchain.
Private blockchain networks are capable of faster transaction processing speeds than public blockchain networks because they are limited in participant size. The ideal use of private blockchains is for conducting secure business transactions without the public having access to recorded information.
Because a central controlling entity is present, issues about whether private blockchain networks can be considered decentralized blockchains have risen.
3. Hybrid Blockchain Networks
Hybrid Blockchain Networks share the characteristics of private and public blockchain networks. For example, in a Hybrid Blockchain, transaction records are made inaccessible to the public, but participants can be given verification or authorization through a smart contract.
Users in a Hybrid Blockchain Network can preserve their anonymity from other participants. Their identities are only revealed when conducting transactions with other participants.
Hybrid Blockchain Networks only employ the benefits of public and private blockchains, meaning they have faster scalability than public ones and are easier to manage than private ones.
4. Consortium Blockchain Networks
Also known as Federated Blockchains, they are similar to Hybrid Blockchains because they utilize public and private blockchain features. The difference is that in a Consortium Blockchain Network, a group of organizations share authority and management of the network.
Consortium Blockchain Networks allow for better collaboration between groups or organizations and are much cheaper in maintenance because the organizations share costs. Groups or enterprises with a shared goal can utilize Consortium Blockchain Networks for better activity transparency and efficiency.
How Do You Know What Blockchain Network Fits You Best?
Each type of blockchain network has its strengths, and because of this, the correct answer to what blockchain network fits best depends on your vision for your business or endeavors. Assessing your goals and needs is important to achieve the best results.
Blockchain technology has a veritable number of uses, and both its security and efficiency are top-notch. This article only provides information on blockchain networks and how they can benefit businesses. Experimentation of blockchain incorporation has become an international trend and will only spread further in the future.