Types of Blockchain Networks: A Beginner’s Guide

Malik Ahsan


Types of Blockchain Networks: A Beginner’s Guide. A distributed, unchangeable ledger in blockchain technology helps corporate networks record transactions and manage physical and digital assets. A blockchain network lets anybody record and trade nearly anything of value, reducing costs and risk. Blockchain networks function how? Applications need a blockchain network to access smart contracts and ledger services. Smart contracts initiate transactions, which are delivered to all network nodes to be permanently recorded on ledger copies.

You can track production, orders, accounts, payments, and more with a blockchain network. Because everyone sees the same data, you may visit the entire transaction history, boosting your confidence and opening new doors. How many blockchain networks exist? Multiple organizations often create a consortium to build a network. The consortium then forms rules to govern firm permissions. Other blockchain networks include public, private, and licensed. This tutorial describes the four primary blockchain networks and their merits and uses.

Key Features of Blockchain Technology

Blockchain technology uses a distributed ledger of users, rather than a central authority, to verify and record transactions. Due to this property, blockchain transactions are immutable, instant, secure, cheap, and impossible to alter. What follows is an explanation of these traits:

  • Fast: There is no longer any need for a middleman because transactions are transmitted directly from the source to the recipient.

  • Consistent: All day, every day, blockchain networks are active all around the globe.

  • Inexpensive: Without centralized, rent-seeking brokers, blockchain networks are cheaper.

  • Secure: The decentralized nature of a blockchain’s network of nodes makes it resilient to attacks and disruptions.

  • Tamper-proof: The immutability and transparency of data on the blockchain render it resistant to fraud and other forms of criminal activity. The same holds for blockchain transactions; everyone accessing the public network can view them.

Types of Blockchain Networks

There is more than one approach to constructing a blockchain network. Types of Blockchain Networks: Some options are public, private, permissioned, or consortium-built.

Public Blockchain Network

Public Blockchain Network

Any user, anywhere in the globe, may access and use a public blockchain to conduct valid transactions; the consensus process decides which blocks are added to the chain and the current state, and all users can expect their transactions to be included if they participate. Public blockchains are protected by crypto-economics, which combines financial incentives with cryptographic verification methods like proof-of-work (Bitcoin) or proof-of-stake (Ethereum). Many people consider these blockchains to be “completely decentralized” in nature.

A public blockchain can prove that some acts are beyond the control of even the app’s developers, providing a safeguard for app users. Many organizations will likely use public blockchains since they are open and do not require third-party verification.

The public blockchain has many advocates because it allows users to remain anonymous. You can do business in an orderly and secure manner on this open platform. In addition, your real name and identity will not be revealed until you want to do so. Once you’ve protected your identity, no one can monitor your online movements. But it needs a lot of processing power, transactions aren’t private, and security isn’t good enough. These factors are vital to consider when considering blockchain applications in different sectors.

Private Blockchain Network

Permissioned blockchains run by a single entity are called private or managed blockchains. In a private blockchain, the central authority decides who can serve as a node. Furthermore, not all nodes are given the same permissions by the central authority to perform functions. Private blockchains are partially decentralized because public access is prohibited to them.

Two examples of private blockchains are Ripple XRP $0.62, a network exchanging virtual currencies between businesses, and Hyperledger, a project that unites open-source blockchain applications. Network sharing at the business level often requires higher privacy due to data confidentiality concerns. A private blockchain could be a good fit if this describes your requirements. Since only a select few users may view specific transactions on a private blockchain, it is clear that this type of network is inherently more secure. Compliance is also essential in every industry. There will come a day when all technology that does not adhere to strict compliance regulations fails. Private blockchains streamline and simplify financial transactions by incorporating and adhering to all applicable compliance rules.

Public or private blockchains have their drawbacks: Private blockchains are more vulnerable to fraud and malicious actors, and public blockchains take more time to validate new data. Furthermore, the centralized strategy favors the same small group of industry players, and third-party management solutions are sometimes encouraged to be used too much. These shortcomings prompted the creation of consortium blockchains. After we covered the basics of public and private blockchain networks, we can compare and contrast them in the table below.

Consortium Blockchain Network

Consortium Blockchain Network

Types of Blockchain Networks: Consortium blockchains are permissioned networks managed by multiple organizations, unlike private blockchains. Due to their decentralization, consortium blockchains are more secure than private blockchains. Consortiums involve cooperation between numerous companies, leading to logistical issues and antitrust problems.

Some supply chain participants lack blockchain infrastructure and technologies. Digitizing data and connecting with supply chain actors may be too expensive for some. Consortium blockchain solutions from corporate software provider R3 are popular outside financial services. CargoSmart created the nonprofit blockchain consortium Global Shipping Business Network Collaboration to improve maritime operator cooperation and digitalize the shipping industry.

Despite having one administrator, the consortium blockchain is immune from dominance threats. Once everyone agrees, this supervisor can enforce regulations, alter balances, and cancel defective transactions. It also does much more to enable goal-oriented collaboration among companies. The consortium blockchain is private since no one can see confirmed block data. Anyone who joins this blockchain can access it. Consortium blockchain transactions are free.

Consortium blockchain is more adaptable than public blockchain. Maximum validators on the public blockchain may have consensus and synchronization issues. Forks result from divergence, but consortium networks are immune. Consortium blockchain has drawbacks that exceed benefits. One of the most significant issues with this blockchain is that it is centralized and vulnerable to bad actors. Reducing participation makes someone look bad. Consortium blockchain rollout requires careful preparations. All members must agree on communication procedures. However, because companies are less flexible than small businesses, creating a public network takes time.

Permissioned Blockchain Network

Permissioned Blockchain Network

Companies often establish permissioned blockchain networks when they build private blockchains. It should be noted that permissions can also be set up on public blockchain networks. This restricts the users who can access the network and the kind of transactions they can complete. No one can participate without an official invitation or permission.

Data in permissioned blockchain networks is not stored in a central location but may instead be accessed instantly by everyone, anywhere, due to the decentralized structure of the network. It ensures that the signatures on all documents cannot be altered. Cryptographically securing every data exchange and transaction ensures the entire system is safe and secure. Nobody also knows who is taking part in the network or mining. Another advantage of the permissioned blockchain is its transparency. Everyone can see any and every information and data. The unanticipated implications of this benefit have led to concerns regarding data security on the permissionless blockchain.

The permissioned blockchain eliminates the need to verify one’s identity. Dedicating your processing power is all that is required to join the network. Anyone can enter the system after finding the nonce value and completing the challenging mathematical puzzle. The constraints of the permissionless blockchain system make it a dangerous proposition for many enterprises. They believe permissionless blockchain solutions for enterprises are a suitable match for their company. These issues are prompting the permissionless blockchain Ethereum to move away from proof-of-work and toward proof-of-stake as its consensus mechanism.

Types of Blockchain Networks: While it’s encouraging that traders can stay anonymous, dealing with such a system can be a pain. The permissionless blockchain prevents, for instance, the identification of individuals participating in a transaction or a scam. Many criminals are taking advantage of blockchain technology because of these features.

Industry Beneficiaries of Blockchain Networks

Industry Beneficiaries of Blockchain Networks

The supply chain, banking, real estate, and gaming industries are just a few that can reap the benefits of blockchain technology. Smart contracts are self-executing code stored and accessible on an immutable blockchain. They allow individuals and businesses to perform ordinary commercial interactions without the cost and uncertainty of communicating with third parties. Blockchain technology is utilized by Litecoin LTC ($72.98), Bitcoin Cash BCH ($230), Bitcoin (BTC) ($42,653), and numerous other cryptocurrencies that are focused on payments. Traditional third-party payment processors are far less efficient than blockchain technology and are unavailable everywhere.

There are several ways in which energy providers, including utilities, gas and electric companies, and suppliers, can benefit from blockchain technology. Among these applications are smart grids, which call for a decentralized marketplace to match generators with consumers. Safely exchanging data across residential smart meters is another use case for blockchain technology. Blockchain network protocols are also helping other industries find innovative solutions, especially those that deal with digital identification and healthcare, which depend on safe and efficient data ownership and management methods. Through public-key cryptography, which assigns users a public key for receiving transactions and a private key for submitting transactions, blockchains make it possible for users to remain anonymous while securely transferring data.

Blockchain technology can potentially revolutionize how governments and organizations worldwide conduct business by increasing transparency, reducing red tape, and boosting public confidence. Some examples of sensitive information that governments can use blockchains to secure include social security numbers, addresses, driver’s license numbers, and birth dates. Blockchain technology may also help the government save money and eliminate waste. Blockchain technology has the potential to simplify processes, remove duplication, and guarantee the integrity of data.

Concerns About Blockchain Technology

Although there are many benefits, attacks and centralized control can easily compromise blockchains that do not have a validated consensus process or a stable ecology of network participants. Types of Blockchain Networks: There should be careful consideration of the blockchain’s decentralization and throughput or the quantity of data it can process in a specific time frame. The Blockchain Trilemma, which involves finding the sweet spot between decentralization, security, and scalability in a single network, is all the rage right now. The environment is another area where blockchain technology has raised concerns. For instance, the proof-of-work (PoW) consensus technique frequently uses much power when running—additional worries center on the potential technical complexities and intimidating nature of blockchain technology for individuals and organizations.

Blockchain technology has already begun to permeate many aspects of business and our everyday lives, thanks to the meteoric ascent of cryptocurrencies on the international financial stage. More and more industries are testing out blockchain technology, and the potential advantages of blockchain-based products and services are sinking in. There appears to be no slowdown for the blockchain industry, and the technology offers great promise for future integration into or replacement of our global digital infrastructure.


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