Blockchain networks explained
Blockchain is a distributed and unchangeable ledger that makes it easier to record transactions and manage assets (both tangible and intangible) within a corporate network. A blockchain network allows virtually any value to be recorded and traded. This reduces risk and cuts costs for all involved. What are blockchain networks, you ask?
Blockchain networks are a technical infrastructure that allows applications access to ledger and smart contracts services. Smart contracts are used to initiate transactions. These transactions are transmitted to all peer nodes in the network and then recorded on the ledger. App users can be end-users who use client applications, or administrators of blockchain networks.
A blockchain network can be used to track orders, accounts, payments, and production. Because members share one view of the truth, you can see every detail of any transaction from beginning to end. This gives you greater confidence as well as additional efficiency and opportunities. How many blockchain networks exist?
In most cases, multiple organizations form a consortium to build the network. Their permissions are controlled by a set policy that is agreed to by the consortium when the network is first created. You can also have permission, for public or private blockchain networks.
This guide will cover all four types of blockchain networks and their applications, as well as their pros and cons.
Blockchain technology’s key features
Blockchain relies on a distributed network of users to verify and record transactions, rather than a single authority. Because of this feature, blockchain transactions are reliable, secure, quick, inexpensive, and tamperproof. These are just a few of the many characteristics that blockchain transactions offer.
- Fast: Transactions can be sent directly from the sender to the receiver without the need for intermediaries.
- Consistent: Blockchain networks work around the clock, 24 hours a day, seven days per week.
- Because they don’t have rent-seeking intermediaries, blockchain networks are more cost-effective.
- Secure: The distributed network of nodes in a blockchain provides collective protection from attacks and outages.
- Tamperproof: The data is transparent and cannot change once it has been time-stamped to a ledger. This makes the blockchain impenetrable for fraudsters and other criminal activity. Everybody with access to a public Blockchain network can view the transactions created.
Different types of blockchain networks
There are many ways to build a blockchain network. They can be private, public, authorized or built by a consortium of people.
Public blockchain network
A public blockchain is one that anyone can view and send transactions to.
Cryptoeconomics is the combination of cryptographic verification using methods such as proof-of-work (Bitcoin), or Proof-of–stake (Ethereum), — protects public blockchains (Ethereum). (Click here to see the differences) These blockchains can be considered “completely decentralized” generally.
Public blockchains can be used to protect app users from developers. They show that certain actions are outside the authority of the app’s developers. Public blockchains are free and open to all organizations. Third-party verification is not required.
Another reason the public blockchain has so many supporters is its anonymity. It is safe and secure, and you can conduct business efficiently and properly. You don’t have to reveal your identity or name to join. If your identity is secure, no one can track your activities on the network.
But, it is not possible to store enough data, nor can transactions be encrypted. These are critical considerations when using blockchain in different industries.
Private blockchain network
Private blockchains are also called managed blockchains. They are permitted and controlled by one entity. A central authority decides who can become a node in a private Blockchain.
The central authority may not grant every node the same rights to execute functions. They are however only partially decentralized because the public has limited access to private blockchains.
Two examples of private blockchains are Ripple (XRP), which is a virtual currency exchange network for business to business, and Hyperledger, an umbrella project that allows open-source blockchain applications.
Network sharing at corporate levels often requires a higher level of privacy because of data confidentiality concerns. If this is something you need, a private blockchain is the best choice. Because only a small number of users can access certain transactions, private blockchains are more stable.
Compliance is crucial in all industries. Technology that doesn’t adhere to strict compliance rules will eventually fail. Private blockchains must follow all applicable regulations to make transactions simple and seamless.
Both public and private blockchains have their disadvantages. Public blockchains take longer for new data to be validated than private ones, while private blockchains are more vulnerable to fraud and other bad actors. The centralized approach encourages reliance on third-party management tools and favors a small number of industry participants. These flaws were overcome by the creation of consortium blockchains.
Let’s now look at the basics of private and public blockchain networks.
Consortium blockchain network
Contrary to private blockchains which are managed by one institution, consortium blockchains can be managed by multiple organizations. Consortium blockchains are more secure than private ones because they allow for greater decentralization.
However, the process of forming consortiums can be complicated because it requires collaboration between multiple businesses. This poses logistical challenges and increases the risk of antitrust violations.
Some supply chain members might not have the infrastructure or technology necessary to adopt blockchain technology. Some supply chain members may not have the necessary infrastructure or technology to digitize their data and connect to other members of the supply chain.
R3, a corporate software developer, has created a popular collection of blockchain solutions for financial services and other industries. CargoSmart created the Global Shipping Business Network Collaborative, a non-profit consortium that uses blockchain to digitize the shipping industry and allow maritime industry operators to work more efficiently.
One party supervises the consortium blockchain, but it is protected from dominance. As soon as all members agree, the supervisor can manage their rules and make balance changes. It also performs other tasks that aim to foster a collaborative spirit between businesses working towards the same goal.
The consortium blockchain is highly private because the information in the checked blocks is kept secret from the public. However, anyone who is a member can access this blockchain. Contrary to public blockchains, the consortium blockchain does not charge transaction fees.
One of the key features that makes consortium blockchains different from public blockchains is their flexibility. Maximum validators might have problems with mutual agreement or synchronization on the public blockchain. This is a reason for the formation of forks, which are not possible in consortium networks.
Although there are many benefits to consortium blockchain, it does have its downsides. This blockchain’s greatest drawback is its centralization, which makes it vulnerable to malicious players. It is assumed that one participant is responsible when the number of participants is limited.
Launching the consortium blockchain is delicate. The protocol must be approved by all members to allow communication between them. It is more time-consuming to establish a public network between businesses because enterprises have less flexibility than small businesses.
Permissioned blockchain network
Businesses that create a private Blockchain typically establish a Permissioned network. Public blockchain networks may also be Permissioned. This restricts who can participate in the network, and how many transactions they are allowed to make. Participants must receive an invitation or authorization before they can participate.
Permissioned Blockchain Networks provide a decentralized platform. This means that data is not kept in a central repository. Anyone can access it from any place and at any time. This ensures that all records are signed in an immutable manner. Because all transactions and information are encrypted cryptographically, the entire system is secure and data safe.
Moreover, participants and miners of the network remain anonymous.
Transparency is another advantage of the permissioned Blockchain. Everybody can view all data and information. This benefit has however backfired and raised concerns about the security of data in the permissionless Blockchain.
The permissioned blockchain does not require that one prove their identity. All you need to do to join the network is to dedicate your computing power. Anyone who can determine the nonce value and solves the complicated mathematical puzzles can join the network.
Many businesses find the permissionless blockchain system to be risky because of its limitations. These businesses believe that permissionless blockchain is inappropriate for them to sell enterprise solutions. These drawbacks are why Ethereum, a permissionless Blockchain, has switched from proof-of-work to proof-of-stake as its consensus mechanism.
Anonymity can be a positive sign as trading participants’ identities are kept secret. However, it can also pose a problem. The permissionless blockchain makes it impossible to trace transactions or identify people involved in scams. These features are why many people use blockchain to carry out illegal activities.
Different blockchain networks can be beneficial to different industries
Blockchain technology can be beneficial in many areas such as supply chain, finance, real estate, as well gambling. Smart contracts are self-executing code that is stored on an immutable Blockchain and can be used by individuals and companies to avoid dealing with third parties.
Blockchain technology is demonstrated by Bitcoin ( Bitcoin Cash), Bitcoin Cash, Bitcoin Cash, Litecoin LTC, and a host of other payment-oriented cryptocurrencies. Blockchain technology is more efficient than traditional third-party payment providers.
Additionally, blockchain can be a profit source for energy companies such as utilities and gas and electric suppliers. Smart grids are one example of this use. They require a local market for power supply and demand. Blockchain can also be used to securely share data between smart meters at homes.
Additionally, blockchain networks are helping industries such as healthcare and digital identity to find innovative solutions. Blockchains allow users to remain anonymous and secure data transmission by using public-key cryptography. This provides them with both a public key for sending transactions and a private one for receiving transactions.
Blockchain may prove to be an effective tool for governments and agencies around the world. It can secure transactions, streamline operations, and foster citizen trust. Blockchains can be used by governments to secure sensitive information like birth dates, social security numbers, and addresses. Blockchain technology can also be used to reduce costs and improve efficiency. Blockchain technology can reduce redundancies, streamline processes, and protect data integrity.
Blockchain technology: Concerns
Despite their many advantages, blockchains without a stable ecosystem of network participants or a verified consensus process can be vulnerable to attacks and central control. Consider decentralization and throughput, which refers to the speed at which a blockchain can process data in a given time. The Blockchain Trilema, which combines security, decentralization, and balance in one network, is attracting a lot of attention.
The environment is another concern surrounding blockchain. For example, the proof-of-work consensus method (PoW), often requires a lot of electricity to run. Another concern is the potential technological complexity and intimidation that blockchain technology could bring to individuals and businesses.
Blockchain technology is now integrated into our everyday lives and businesses. This was evident in the rapid rise of cryptocurrency in the global financial market. Blockchain technology is being used in more sectors, and people are realizing the benefits and utility of blockchain-based products and services. The blockchain industry is not slowing down and has the potential to be a part of or even completely replace the digital architecture of the world in the future.
