Over the past years, Blockchain technology has marked its significance across industries as it has amazing potential to revolutionize the way businesses process. That’s why businesses prefer this technology over anything else to streamline their working methods such as process automation, securing transactions, etc.
Considering global spending on Blockchain solutions, it is predicted to evolve from US$4.5 billion in 2020 to a projected value of US$19 billion by 2024. With time, the Blockchain technology market size is also expanding from 2017 to 2027.
As per the stats, the global Blockchain market was priced at US$1.57 billion in 2018 and it is predicted to grow a hundred times more by reaching US$163 billion by 2027. Look at the below graph-
With the increasing popularity of Blockchain technology, its revenue is also predicted to experience enormous growth in the coming years with an estimate of more than US$39 billion in size by the year 2025.
These skyrocketing market statistics have led industries toward this platform for making highly secured transactions and providing their customers with a safe & amazing experience.
From creating decentralized applications (dApps) to a wallet to smart contracts to crypto trading exchanges, businesses can use different Blockchain networks to obtain proficient Blockchain solutions.
But before deciding on Blockchain technology or which Blockchain network they should, enterprises must know their specific purposes and how they solve a set of issues to use them appropriately.
We have come up with the below guide including details about different types of Blockchain networks, along with the comparison table of four main types of Blockchain networks that will help you to choose the appropriate network while getting Blockchain development services. Let’s have a glance-
What is Blockchain Network?
A blockchain network is known as a distributed, decentralized, and immutable peer-to-peer digital ledger to record transactions and data from different computer nodes. Generally, Blockchains are created for specific purposes including users getting varied types of tasks or access.
The Blockchain, a ledger of records known as Blocks is connected using cryptography. Every block includes a cryptographic hash of the previous block, transaction data, and a timestamp. Blockchain also abolishes data supplication and increases security via data integrity.
In this, smart contracts are used to originate secure transactions that are transferred to every peer node in the network later and also unalterably taped on their copy of the ledger.
Blockchain is an underlying technology used for different cryptocurrencies such as Bitcoin, but it also has likely apps far beyond these currencies.
The entire Blockchain completely works on the principles of security, transparency, and consensus. The decentralized nature of blockchain ensures that no single entity can control the whole network leading to make it unalterable to censorship and manipulation.
Need for Different Types of Blockchain Networks
There are four main types of Blockchain networks- Public, Private, Hybrid, and Consortium. And here, the question arises why we need these different Blockchain types or networks.
The need for different Blockchain types arises because of diverse requirements and to address specific challenges. Look at the following reasons to know the need for diverse types of Blockchain-
- Privacy and Security
- Smart Contract Capabilities
- Cost & Efficiency
- Consensus Mechanism
- Regulatory Compliance
1. Privacy and Security
Some specific businesses and industries go for Blockchain services to have augmented privacy and data confidentiality. If they go for a public Blockchain, it reveals all the transactional data to the public, hence they prefer permissioned or private blockchains to limit access & visibility to allowed participants only to ensure confidentiality.
Top Blockchain development companies use different Blockchain networks as per their capability to manage the number of participants and transactions. Some Blockchain networks are created for high transaction output, making them appropriate for apps that need fast processing, while others also go for decentralization leading to lower scalability.
3. Smart Contract Capabilities
Intricate smart contracts are not supported by all types of Blockchains; hence businesses need to use different Blockchain in order to handle them. Different networks cater to different levels of programmability enabling professionals to select the most appropriate platform depending on their app requirements.
4. Cost & Efficiency
The network efficiency and cost of transaction fees may differ significantly based on different Blockchains. Some Blockchain applications may need low-cost transactions, on the other hand, others prioritize efficiency and speed over costs.
5. Consensus Mechanism
Varied Blockchain networks employ different consensus mechanisms such as Proof of Stake, Proof of Work, Delegated Proof of Stake, etc. Also, businesses’ choice of consensus mechanism is based on aspects like energy efficiency, security, block finality, and decentralization.
6. Regulatory Compliance
There are various industries and use cases requiring adherence to particular regulatory requirements. In comparison to public Blockchains, permissioned or private Blockchains allow for more control over users and data shared by them aiding compliance with related laws and regulations.
There are several Blockchains and distributed ledgers available that have made interoperability vital. Hence, different networks are there to ensure smooth interconnection and secure data exchange allowing smooth data flow across different systems.
What Are Different Types of Blockchain Networks?
There are multiple ways to create Blockchain solutions, but depending on the business use and requirements, it is essential to choose a suitable blockchain network. Every Blockchain is created specifically for a purpose and to address particular issues.
Check out the below different types of Blockchain networks including public, private, hybrid, and consortium-
- Public Blockchain
- Private Blockchain
- Hybrid Blockchain
- Consortium Blockchain
1. Public Blockchain
Among all types of Blockchains, Public blockchains are the most used types. These allow everyone to join the network and are fully decentralized. It has a transparent digital ledger that can be accessed by anyone without any restriction or permission.
When it comes to private vs public Blockchain, public blockchains facilitate users for open participation and equal merits to validate and authenticate transactions to the chain. Every user in the network keeps a copy of the entire Blockchain along with security and redundancy.
Public blockchains use consensus mechanisms such as Proof of Stake (PoS) or Proof of Work (PoW). In this, PoW depends on computational power for transaction validation, on the other hand, PoS uses the stake of users AKA cryptocurrency holdings.
- Having no central authority makes it unaffected by censorship and a single point of failure.
- High level of transparency as all transactions are visible publicly resulting in enhanced trust and accountability.
- The vast network of nodes provides high-level security and a robust consensus mechanism.
- Anyone is allowed to join the network leading to innovation and inclusivity.
- Users are incentivized to sustain and validate the Blockchain fostering network sustainability.
- Public blockchains may have high fees for transactions at the time of heavy network usage.
- The PoW consensus mechanism used in some public Blockchains such as Bitcoin requires high computational power and leads to many environmental issues.
- Due to the openness, public blockchains can conflict with regulatory requirements in some areas, making it hard to conform to local regulations.
- Public blockchains are used in mining and exchanging cryptocurrencies such as Ethereum and Bitcoin enabling users to transact with no intermediaries like banks.
- These have also been used in decentralized financial systems to facilitate users with different services including borrowing, lending, decentralized exchanges (DEXs), yield farming, and stablecoins.
- Public blockchains are suitable to track and verify supply chain activities ensuring traceability, authenticity, etc.
- These can be used in the process to create and trading NFTs including digital arts and in-game assets with provable ownership and scarcity.
- It supports programmable smart contracts known as self-executing agreements with predefined laws helpful in process automation with no middlemen.
2. Private Blockchain
Private blockchains only allow participants with authorized and validated information. This works as a distributed ledger technology operating in a restricted network, a selected group of participants, and with limited access.
In public vs private blockchains, public blockchains are open to anyone but private blockchains are permissioned reflecting the allowance to only pre-approved participants.
Private blockchains permit organizations to have more control over all the data and processes making them compatible with industry regulations and other policies.
Also, the consensus mechanism is faster and more efficient in comparison to the public blockchain as there are limited participants. It makes private blockchain suitable for enterprise-level apps with paramount privacy and speed.
Above all, private blockchains provide enhanced security as it is only accessible to limited members only leading to less risk of unauthorized access and possible risks.
- It provides limited access to only trusted participants alleviating the risk of illegal entry and possible attacks.
- Faster transactions and speed along with enhanced data confidentiality and privacy.
- A private blockchain can be customized according to specific organizational requirements.
- Fewer validators and nodes result in less operational costs in comparison to public blockchains.
- Smaller network size results in more efficient consensus mechanisms.
- Decreased level of decentralization due to a controlled number of participants.
- The selected group of validators or authorized nodes can have a single point of failure if any of them gets malfunctions or compromises.
- Creating and maintaining a private blockchain can lead to enhanced Blockchain app development costs due to significant investment in administration and infrastructure.
- Financial institutions prefer private blockchain to manage the processes for cross-border payments, trade settlements, and remittances. It provides them with faster transaction times and safe data sharing.
- The government employs private blockchain to maintain citizen records, manage identity verification, and track property ownership efficiently and securely.
- ERP systems integrated with private blockchain enable businesses to manage supply chains, financial processes, inventory management, increased data integrity, and fewer redundancies.
- It helps to collaborate between different organizations or consortiums, making them able to share confidential data and automate work processes.
- Private blockchains aid virtual assets in the gaming realm while making sure of safe ownership and peer-to-peer trading.
3. Hybrid Blockchain
Hybrid Blockchain is among the types of Blockchain networks that is an amalgamation of public and private Blockchain networks. It comprises the best of both networks enabling decentralization, transparency, and immutability similar to public Blockchain. The Hybrid Blockchain network also has some elements of private blockchains such as faster transaction processing and enhanced privacy.
Hybrid Blockchains store confidential transactions and sensitive data on a private network that is only available to authorized participants including consortiums or businesses. On the other hand, less sensitive data will be stored on the public chain leading to inclusivity and openness.
A Hybrid Blockchain network is specifically beneficial for industries such as healthcare, finance, and supply chain management requiring regulatory compliance and secure data handling.
- The blend of public and private networks enables higher scalability by adapting a larger number of transactions.
- The hybrid approach facilitates organizations to tailor their blockchain infrastructure to align their specific use cases providing more flexibility than a regular solution.
- Employing a combination of public and private networks would be more cost-efficient than adopting an entire private blockchain network.
- This network is helpful to develop trust between participants as it creates a balance between data confidentiality and openness.
- Private chains offer quicker transaction processing in comparison to entire public blockchains to enhance system performance overall.
- A Hybrid Blockchain network adds complexity to the entire architecture and needs appropriate integration & synchronization between private and public components.
- The Hybrid model can have potential attack vectors as both private and public chains require to be secured properly.
- The combination of private and public elements may raise governing concerns, particularly about data privacy and compliance in related industries.
- A hybrid blockchain facilitates traceability and transparency of goods in supply chain management along with confidential business data protection from public visibility.
- This blockchain model can enable smooth and secure cross-border transactions while keeping financial information restricted within the network.
- It facilitates a tamper-resistant and transparent voting system to protect vote choice and voter identities.
- Hybrid blockchain networks are able to create safe and decentralized marketplaces to buy and sell in-game digital collectibles and assets.
- It makes property transactions easier while providing transparency in property ownership and protecting confidential financial information.
4. Consortium Blockchain
Consortium Blockchain network works as a distributed ledger technology comprising the benefits of both private and public blockchain networks. In this network, a group of trusted and pre-chosen participants including organizations, companies, or government entities create a network to maintain and authorize the blockchain collaboratively.
Unlike public Blockchains that are open to everyone and private blockchains regulated by a single entity, the Consortium Blockchain network provides a middle way. It allows consortium members to share confidential data securely while continuing transparency and decentralization.
The governance model of consortium blockchain includes a consensus protocol agreed upon by the active individuals to enable validated transactions that are added to the Blockchain ledger transparently.
It leads to enhanced trust and less risk of malicious activities. Overall, consortium blockchains maintain a balance between the decentralization advantages of public blockchains and the controlled access needed for enterprise use cases.
- Restricted access to trusted users guarantees the security and confidentiality of sensitive data while lessening the risk of unauthorized access or attacks.
- The consortium has a smaller group of validators; hence its consensus mechanism can be faster and more efficient leading to better scalability.
- Less need for intricate PoW (proof of work) or consensus algorithms outcomes in transaction fees and lower energy consumption.
- This network facilitates smooth collaborations and data distribution between organizations resulting in managed workflows and enhanced interoperability.
- The Consortium Blockchain network can be customized to align with the specific requirements of participants which makes it simple to execute industry-specific use cases.
- Decisions related to consensus mechanisms, updates, and network rules need an agreement among consortium members resulting in possible governance clashes and interruptions in executing changes.
- Though consortium blockchains provide more privacy in comparison to public blockchains that can lead to less transparency for external stakeholders and auditors. It makes data accuracy verification harder on the blockchain.
- When the Consortium is controlled by strong entities, there is always a risk of collusion in negotiating the justice and neutrality of the network.
- Financial institutions, banks, and other payment processors can team up on a consortium blockchain to manage cross-border payments, facilitate real-time & safe settlements, and increase KYC processes.
- Healthcare providers, researchers, and insurers can exchange medical records, patient data, and research findings securely to have enhanced data privacy and compliance with regulatory needs.
- In international trade, Consortium blockchains can make trade financing processes easier via an immutable and transparent transactions record, lowering the risk of fraud and augmenting the trust among participants.
- Consortium blockchains can enable supply chain financing with a consistent source of transaction data for lenders, lessening risk and facilitating a quicker approach to working assets for suppliers.
- Private and government organizations can form an interoperable and secure identity management system on a consortium blockchain network augmenting user privacy and decreasing identity fraud risks.
Check Out the Comparison Table of Blockchain Networks
When it comes to public vs private vs Consortium Blockchain, you need to have a complete overview of Blockchain types considering different parameters. To get in-depth details of Blockchain network types, you can also consult with a top Blockchain development company.
But for now, you can have a look at the below comparison table of different types of blockchain networks, including public, private, hybrid, and consortium:
|Parameters||Public Blockchain||Private Blockchain||Hybrid Blockchain||Consortium Blockchain|
|Access||Open to everyone||Restricted Access||Partially public, partially private||Restricted Access|
|Consensus Mechanism||Proof of Work||Proof of work, Proof of stake, etc.||Combination of different consensus mechanisms- Proof of work, Proof of stake, etc.||Proof of work, Proof of stake, etc.|
|Scalability||Lower scalability||Higher Scalability||It may vary due to the network architecture and design.||Better scalability compared to the public blockchain.|
|Privacy||Less privacy as it is accessible to everyone.||Improved privacy.||Customized privacy features as per the requirements.||Higher level of privacy compared to the public blockchain.|
|Use Cases||Mining and exchanging cryptocurrencies, decentralized financial systems, supply chain management, digital arts, etc.||Enterprise applications, supply chain management, and internal data sharing.||Supply chain management, decentralized finance (DeFi), voting systems, digital arts, and inter-organizational collaboration.||Financial institutions, the healthcare industry, supply chain management, and confidential data sharing among trusted entities.|
|Examples||Bitcoin, Ethereum||Hyperledger Fabric, Quorum, R3 Corda||Quorum||R3 Corda, Hyperledger, IBM Blockchain|
As we already know, using Blockchain technology can be very helpful for enterprises, and by choosing the right Blockchain network, they can gain more advantages than expected. It is why we have brought up this guide on different Blockchain networks including public, private, hybrid, and consortium that you need to know before you hire Blockchain developers.
Whether you are looking for details on private vs public blockchain or private vs public vs consortium or anything else, this guide will help you to choose the appropriate network as per your business requirements and goals.
To get the right guidance and advantages of this progressive technology, you can also contact experts at SemiDot Infotech with years of experience and skills. Connect with us now!