Are you eager to learn more about blockchain technology and its potential? This article will focus on each type and help you determine which is suitable for your project. There’s no question that blockchain has evolved in the last decade. It began with bitcoin, which provided a public blockchain. We may also refer to bitcoin’s blockchain as the first release of blockchain technology but what is the difference between blockchains?
We’re presently at a stage where several different sorts of blockchain technology address a particular set of issues. Furthermore, many businesses are adopting them to maximize the advantages as feasible.
What is Blockchain Technology?
Merriam-Webster stated that blockchain technology is “an open, distributed ledger that can efficiently and verifiably record transactions between two parties.” To make it simpler to comprehend, we may divide this definition into smaller parts. When a blockchain is referred to as “open,” it is usually because the software architecture on which most blockchain protocols are based is open source. You can have both public and private blockchains built using open source code, which we’ll get into later. The phrase “distributed ledger” refers to the fact that the accounting ledger is distributed among numerous parties in a blockchain. As a result, it is not owned or wholly controlled by anyone.
Blockchain can be used to make any transaction between two parties more efficient. It’s because there is no need for a third party in the marketing (for example, a bank), which lowers friction and costs. When transactions are recorded in the blockchain ledger, they become official; once they’ve been entered, they can’t be edited. Blockchains rely on cryptography to guarantee that these transactions are genuine and irreversible. Now that we’ve learned blockchain technology, let’s look at the many chains that may be implemented today.
What Is the Difference Between Blockchain and Cryptocurrency?
Many individuals are perplexed by the distinctions between blockchain and cryptocurrency. Comparing this relationship to a mobile application (e.g., Uber or WhatsApp) and the platform on which it runs is a helpful way to clarify things. Blockchain is the platform for cryptocurrency, an app that runs on the blockchain platform. Because blockchain and bitcoin were both developed around the same time. There is a lot of misunderstanding between the two.
What are the Various Type of Blockchain?
Blockchain has been divided into four basic types based on its use cases, with decentralized technology classified into four main types depending on how it’s used:
Open-source blockchain networks are made up of private blockchains. They let everyone join the network as users, creators, network members, and miners. Public blockchains are open to all members without any barriers. All transactions processed on a public blockchain are transparent and available for inspection by all network participants.
Public blockchain networks have no central authority and are entirely decentralized. Because anybody can join the network as they choose, regardless of location or citizenship, it is highly resistant to censorship. As a result, public blockchains cannot be disrupted in any way.
Private blockchains are blockchains where people need permission to join. Only people who have permission can do transactions on the blockchain. The transactions on these blockchains are private and only accessible to people with permission. These blockchains are essential for businesses that want to share data but don’t want to share confidential business information on a public blockchain. A public blockchain is less centralized than a private one. Because it consists of entities running the chain, giving them equal control over different participants and governance structures. Private blockchain networks can be used for voting, supply chain management, digital identity, asset ownership, and other tasks.
A hybrid blockchain is a network with both private and public blockchain features. This means that it has the privacy and security of a private blockchain network and the transparency of a public blockchain network. It allows businesses more flexibility since they can choose to put up any data publicly as they please.
The interchange feature, a patented innovation, allows the network to connect with other blockchain networks. The chain may link to other blockchain protocols thanks to this functionality. It’s simple to establish a multi-chain network using a hybrid approach. They use the combined hash power used for public chains to provide better privacy for transactions by dividing it among several public chains.
Consortium blockchains, sometimes known as federated blockchains, are distributed ledgers that enable any new participant on the network to connect and contribute data rather than starting from the ground up. Organizations may use consortium blockchains to get answers to time and cost-effective development.
The advantages of a consortium blockchain are numerous, including validation, control, security, economic viability, flexibility, and energy consumption for mining. The consortium blockchain is used in logistics, healthcare, insurance, banking, and finance sectors.
What Is Blockchain Used for?
Blockchain technology can be used to create numerous different types of applications. Cryptocurrency is just one of them. Blockchain may be utilized in various ways and industries, including supply chain management, accounting, identity management, and more.
- Walmart is keen on utilizing the immutability and shared ownership or consortium elements of blockchain to improve food traceability and tracking, resulting in better food safety.
- Banks are applying their private blockchains to tokenize (digitalize) their internal assets, allowing them to move money internally and saving millions of dollars in expenses.
- Bitpesa and other firms allow businesses in countries with limited banking services to transfer money more efficiently across borders.
- Accounting firms are discovering the potential of transparency and immutability for their audit and accounting teams.
Why Blockchain as A Service (BaaS) Is Gaining Adoption from Enterprises
Like other early adopters, early adopters of blockchain technology have had to endure the pains associated with adapting to any new platform. Setting up difficulties, inadequate developer tools, and operational challenges have been a norm with every new implementation since its inception. Now there is blockchain as service solutions that make it easier for anyone to develop a blockchain application. According to Investopedia, Blockchain as a Service (BaaS) is a service that allows consumers to use cloud-based technologies (such as Dragonchain) to host, develop, and use their blockchain applications and smart contracts.
This model, like Software as a Service, allows enterprises to quickly get up and running with blockchain for the first time without risking too much. Blockchain as a Service makes it possible for businesses of all sizes to get started with little investment in knowledge or difficulty getting started.
Blockchain is a technology that underpins cryptocurrencies, but it’s not all the same. The current blockchain services and pricing models are all over the map. Blockchain as Service providers like Dragonchain provide much-needed certainty and simplicity to the blockchain ecosystem. This gives developers and organizations the security and reduced risk they need to start their blockchain journey.
Why Do We Need Blockchain Technology?
Now that we’ve identified what a blockchain is and discussed the many types of blockchains, let’s talk about why we need them to begin with. There are several uses for blockchains and numerous benefits associated with their adoption. The most common reason for adopting blockchain technology is to conduct value transfers using Bitcoin. Blockchain solves a very particular issue known as “double spending.”
We all agree that the typical method of exchanging things in the digital world is to duplicate what we have, such as a pdf or photograph, and send it to someone else.
- As you might expect, if this document were a dollar, both the sender and recipient would have identical copies of it, and they could spend it.
- The danger of double spending has been eliminated by blockchain technology, which ensures that the recipient knows that they are only holding the dollar and the sender knows that they no longer have it.
- Anyone who attempts to spend a dollar understands that the money is no longer valid for anyone else.
Private or Public Blockchain, Which One Is Better?
Before making a decision, we’ve thoroughly analyzed two significant sorts of blockchains: private and public blockchains. Both of them have specific differences from one other. On the other hand, where a private network might not seem very trustworthy, you can fully trust a public network for its whole consensus (proof-of-work) mechanism.
Every instance or case of a successful blockchain application we have seen has utilized a public blockchain. Its existence assures the security of the entire network of a public blockchain. It also provides data transparency since every node has equal access to the record kept in the blockchain. The Bitcoin system is one of the most famous examples of a public blockchain.
What Are the Fundamentals of Blockchain Technology?
The following are the main characteristics of decentralized blockchain technology:
Blockchains employ a secure and fault-tolerant mechanism to establish agreement on each block state of the blockchain ecosystem’s ecosystem. The entire process of the consensus mechanism entails validating and authenticating every transaction on the network. In simple terms, consensus assures that data recorded in the ledger is genuine and unaltered.
There are a variety of consensus algorithms in existence, including Proof-of-Work (PoW), Proof-of-Stake (PoS), Proof-of-History (PoH), voting-based consensus, leader-based consensus, economy-based agreement, Proof of Authority (PoA) and Virtual Voting mechanism for verifying data and detecting bad actor behavior on the blockchain.
The block time is the amount of time it takes to generate a new block on a blockchain platform. Transactions on a blockchain are sent out immediately, but they aren’t accepted until they’re linked to the following block in the chain. As a result, low block times are always needed for rapid transaction validation, so that network nodes don’t have to wait too long to confirm transactions.
Transaction rate per second
The number of transactions in a block is measured and labeled as TPS or transaction per second. The number of transactions calculated for each block is called the transaction per second (TPS) in the blockchain. On a good network, higher TPS indicates greater bandwidth.
Since the distributed blockchain technology is permanent and tamper-proof, it is held accountable for accurate and verified data from the processed transactions. As a result, blockchain aids in data verification. Auditors no longer have to scour various bank statements since the transactions may now be verified directly from the public ledger, which is accessible for everyone’s inspection.
Trust and security
We don’t need intermediaries in the blockchain since we operate directly in a decentralized manner. Intermediaries charge fees for establishing trust between various parties. By distributing data across the platform, blockchain eliminates the central authority or administrator. As a result, trust is established using consensus algorithms, in which all network nodes approve the transaction.
Blockchain’s security and transparency are remarkable since it provides information on the transaction to all parties involved. Every participant of the blockchain network will have easy access to transaction data processed on the blockchain network.
Scalability in the blockchain is the ability of a network to process a more significant number of transactions as more people use it. The power of the blockchain ecosystem to manage a larger volume of transactions and data without delaying latency or bootstrapping time is referred to as scalability. Because various blockchains have different throughputs, their scalability factors are also affected. A blockchain platform with high scalability implies that it can execute more transactions per second than other blockchains.
Forming an unalterable ledger is one of the essential features of a blockchain platform. It’s easy to tamper and hack centralized databases since they rely on third-party security. However, when it comes to the distributed ledger of the blockchain, no data can be altered once it is committed and saved on-chain. As a result, the blockchain is inherently unchangeable and offers special auditing services if required.
The blockchain’s transaction costs are the sum consumers pay for their transactions to be accepted and recorded on the blockchain. The gas fees system is based on a demand and supply mechanism.
If the overall transaction volume is high and demand for transactions is high, miners will choose to include those that pay higher gas fees. Because of the increased demand-supply arrangement, gas costs rise as needed, forcing consumers on-chain to pay more for the fast processing of their transactions.
- Bitcoin Blockchain ($BTC)
- Tron Blockchain ($TRX)
- Ethereum Blockchain ($ETH)
- Polygon Blockchain ($MATIC)
- Binance Smart Chain ($BNB)
- Cronos ($CRO)
- Solana Blockchain ($SOL)
- Monero ($XMR)
Real-world usage differences of blockchains are mostly in the privacy, speed, and cost area.
Polygon, Tron, and Binance Smart chain as low fee and fast blockchain versions for example
Monero for privacy.
And so many other use cases.
Depending on your strategy and usage using different blockchains for different cases is still the norm.
Please do further research on the proper chain to use for your personal situation/case.
Moritz Pindorek (Moritzpindorek.com)
Social Media, Marketing & Blockchain
Crypto/Web 3 Advisor, Top 10 Crypto Influencer 2022(Forbes Monaco) & Top 10 Entrepreneur 2022 (Forbes Monaco)
Owner and writer for Cryptouserguide.com