The Core Essence of Blockchain Technology and Its Various Forms

Blockchain is gradually being recognised as a possible way to respond to concerns about financial inclusion. It consists of different networks that address the specific requirements of individuals and companies, and it is important to realise that not all blockchains are the same in terms of what they can do and how they operate.

Classifying Diverse Blockchain Networks

It is important to recognise the considerable variation between various blockchain networks, even though they all revolve around a central concept. The level of decentralisation is a crucial factor in distinguishing between these networks, and based on this factor, the classification of blockchain types is determined.

Public Blockchain

Decentralised networks, known as public blockchains, are available to anyone with an internet connection. These networks utilise a peer-to-peer system where transactions undergo verification through a consensus algorithm. Proof of Work (PoW) and Proof of Stake (PoS) are public blockchains’ most commonly used consensus methods.

The data in a public blockchain system is distributed across several nodes. To maintain the stability and integrity of the digital currency blockchain, the consensus algorithm ensures that these nodes reach an agreement on the current state of the ledger. This algorithm plays a crucial role in this process.

Private Blockchain

Managed or permissioned ledger systems, also known as private distributed ledgers, operate within a limited network and are controlled by either a single entity or a group of entities. These types of blockchains are typically used by organisations that prioritise data privacy and desire to have a significant level of control over their data.

Access permissions within a private blockchain are limited to a specific group of users. The controlling entity can determine who can access, contribute, or modify the data stored on the blockchain. Private blockchains are smaller in scale, which often results in faster and more efficient performance compared to public blockchains.

Consortium Blockchain

A consortium blockchain is a network where several organisations collaborate in a decentralised manner. It differs from a private distributed ledger controlled by a single entity, as consortium blockchains distribute authority among all participating parties. Every member organisation is granted permission to access and engage with the blockchain within this network. Despite this, any confidential information stored within the verified blocks is kept hidden from the public.

Hybrid Blockchain

Hybrid networks combine features of public and private ledgers to offer a distinctive set of functionalities. These blockchains enable organisations to control data access while ensuring transparency in transaction verification by integrating the best of both worlds.

Organisations can create a hybrid distributed ledger by combining a private, permission-based structure with a public, permission-free system. This approach allows for the verification of transactions through the usage of smart contracts, while also maintaining confidentiality and protecting sensitive information.

The Verdict

Numerous blockchain networks exist with unique configurations and objectives. Each network possesses its strengths, weaknesses, and attributes that make it suitable for situations where it can demonstrate its maximum capability.