Guide to the 4 Types of Blockchain Networks – EnterpriseNetworkingPlanet | Region & Cash

Blockchain is becoming increasingly popular for many applications that businesses can use on a variety of networks. It’s best known for its pivotal role in cryptocurrency, but blockchain has many more uses.

Blockchain networks can be used to customize their functionality and adapt it to a company’s needs. The technology can seem confusing at first, but blockchain basically breaks down into two broader categories and four unique types of networks.

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Categories of blockchain networks

Blockchain networks generally fall under one of two categories: allowed or not allowed. Each of the four unique types can be placed into one of these categories. although some may contain both.

Businesses considering adopting blockchain technology should first decide whether a permissioned or permissionless network is best for them. Networks in these two broader categories work differently and have their pros and cons.

Permissionless Networks

Permissionless blockchain networks are probably the first thing that comes to mind for most people today when they think of blockchain, although they may not know it. They are the classic decentralized ledger made famous by cryptocurrencies. Anyone can join the network and create new data nodes. Everyone on the network is anonymous and there are no restrictions on rights from one node to another.

Permissionless blockchain networks are generally more secure than permissions because they are decentralized. There are so many nodes that it is a challenge for any bad actor to damage the entire system. They’re open source and more accessible, so there’s also a level of transparency that increases trustworthiness. Anyone can see every transaction on the blockchain, even if they can’t see who made it.

Of course, this is a double-edged sword. For some organizations, the transparency of permissionless networks can pose too much of a privacy threat. They are also so large that they tend to work much more slowly. Networks take longer to process data, which is not energy efficient.

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Approved Networks

Legitimate blockchain networks are less decentralized and open, with restrictions on who can access what. Users may only be able to work in certain nodes, and only certain people can validate transactions. Their identities are not anonymous on the blockchain.

Many companies prefer permissioned blockchains because they have much better privacy than permissionless networks. They are more secure in their own way as only specific users can create, edit and validate transactions. The number of nodes is limited, as is the number of users, so permissioned blockchain networks also run faster than permissionless networks.

However, it’s worth noting that the limited number of nodes can make them vulnerable to attacks as they are more limited.

Types of blockchain networks

1. Public blockchain

The first of the four main types of blockchain networks is the public blockchain. This is the only completely permissionless network type and the type most commonly used for cryptocurrency applications. One of the main advantages of this distributed ledger technology is the inherent security.

The ledger is open source and is not stored in a single location. Anyone with access to it has their own copy, so destroying data on the public blockchain is very difficult. Once a transaction is validated, it can no longer be modified.

Many computers connected to the public blockchain validate their transactions and confirm that all data is legitimate. This requires significant computing power and is known to consume enormous amounts of energy. In fact, the entire cryptocurrency community faces controversy over the carbon emissions generated by verifying blockchain transactions on all of these computers. The slow processing speed and the immense computing power required are major disadvantages of a public blockchain.

The most common applications for public blockchain networks are cryptocurrency and document validation. For example, Blockchain technologies such as smart contracts and NFTs can use them.

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2. Private Blockchain

Private blockchains, also called managed blockchains, are permissioned networks with limited access and limited user rights. They are pseudo-centralized in that a single authority can control them. Unlike public blockchains, these networks do not use open source code. Only authorized users or nodes can view, create, edit, or validate data, as determined by the party monitoring the system.

Private blockchain networks tend to be an attractive choice for businesses. A company can leverage this technology while limiting who can see its network and keeping competitors out of their data. Private blockchains also run much faster than public versions as there are fewer nodes to work with.

Of course, some critics of these networks say they can be less secure. Any knowledgeable user can analyze the open source code on a public blockchain and find and fix bugs and security vulnerabilities. This is not the case on a private network. Organizations using this type of network must ensure that it is designed and operated securely.

It’s also worth noting that the smaller number of nodes in private networks can in itself be a vulnerability. This concentration means there is a higher risk if one of them goes offline and it may be easier for a hacker to cause serious damage if they break into the network.

3. Hybrid blockchain

Some blockchain networks have aspects of both approved and unapproved versions. These are hybrid blockchains. This type of network can strike a good balance as they offer many Key benefits of blockchain for business, such as B. the ability to use smart contracts and quickly review transactions. They do this without being completely open or public.

Hybrid networks have a central authority, but at least some of the nodes are open to public validation, adding a level of transparency without relinquishing control. People can use the network without having the necessary access for a hostile takeover. Some nodes and transactions can be made public, others not. The control authority is responsible for this configuration decision.

There are many applications for hybrid blockchains. They’re already gaining popularity in real estate, but they also have use cases in healthcare, government, and retail. For example, citizens could vote on a hybrid blockchain where identities and legitimate votes cannot be duplicated or forged. Election officials could then view and validate the data without the risk of changing anything in the process.

Similarly, a hybrid healthcare blockchain could allow medical workers to view and access patient records while maintaining enough privacy to keep unwanted users away from these nodes.

4. Consortium Blockchain

The last type of blockchain network is a consortium. Also known as federated blockchains, they are similar to private systems but with some key differences. Consortium networks are managed by a group of authorities and not by a single control body. Multiple organizations can even oversee the same consortium blockchain.

A syndicated network is somewhat decentralized while retaining the characteristics of a fully permissioned private network. This type of blockchain is becoming increasingly popular with companies such as IBM using it.

consortium networks require a high level of collaboration between all parties, and they can be an effective model for supply chain, financial, and enterprise applications. The organizations involved can maintain access controls and get the processing speed, security and scalability of a private network.

Of course, consortium networks also have disadvantages to consider. For example, all organizations managing the network must approve changes. This can limit the customization options a company gets and the time it takes to enforce proposed protocols.

As with private networks, the lack of visibility can be a problem for some organizations. Vulnerabilities from even one of the monitoring organizations can open the door to a breach of the entire system. It’s also worth considering the possibility that all companies managing the blockchain together can hide data from each other. Therefore, maintaining a consortium blockchain requires a high level of trust between partners.

Blockchain for business

Blockchain technology can be extremely valuable for businesses. You can use a blockchain network to verify transactions, validate contracts, and manage data quickly and seamlessly.

Each type of network has its pros and cons, but there is a model for every use case that organizations have. Choosing the right solution is as simple as finding the right balance between transparency, security and access control.

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