It has always been argued that hybrid blockchains are preferred to the other blockchain models. This article will compare the different models and let you judge the best.
Blockchain is based on a peer-to-peer topology, which allows data to be stored globally across millions of servers.
It is also known as peer-to-peer (P2P), decentralized, distributed ledger technology that operates without using a third-party intermediary or central authority, as opposed to traditional banks, which do.
Blockchain provides increased security, transparency, and immutability, which is why it is the most widely debated technology.
The technology is attracting Blockchain developers and experts because it has the potential to transform the way industries and businesses operate.
This article compares hybrid blockchains and the other types of blockchain models. We will examine all four types of blockchain models to get our comparison right.
Before we do that, let’s see why we need the different types of blockchain models.
The Need for Blockchain Models
The necessity for several Blockchain types arises due to various requirements and challenges.
Look at the following reasons to understand the need for various forms of Blockchain.
- Scalability
- Privacy and security
- Cost and efficiency
- Smart contract capabilities
- Regulatory compliance
- Consensus mechanism
- Interoperability
Scalability
Top Blockchain development businesses use various blockchain networks based on their ability to manage the number of members and transactions.
Some Blockchain networks are designed for high transaction output, making them ideal for apps that require quick processing, while others prioritize decentralization, resulting in poorer scalability.
Privacy and Security
Some firms and sectors use Blockchain services to increase privacy and data secrecy.
If they choose a public blockchain, all transactional data is exposed to the public; therefore, they choose permissioned or private blockchains that limit access and visibility to only authorized participants to ensure secrecy.
Cost and Efficiency
The network efficiency and cost of transaction fees may fluctuate dramatically depending on the Blockchain.
Some Blockchain applications may require low-cost transactions, but others value efficiency and speed over cost.
Smart Contract Capabilities
Not all blockchains support intricate smart contracts; thus, firms must utilize several blockchains to manage them.
Different networks cater to various levels of programmability, allowing professionals to select the most suited platform based on their app requirements.
Regulatory Compliance
Numerous sectors and use cases necessitate adherence to specific regulatory criteria.
Permissioned or private Blockchains, as opposed to public Blockchains, provide greater control over users and the data they share, thereby improving compliance with relevant laws and regulations.
Consensus Mechanism
Various blockchain networks use consensus mechanisms, such as Proof of Stake, Proof of Work, Delegated Proof of Stake, etc.
Also, corporations select consensus mechanisms based on energy efficiency, security, block finality, and decentralization.
Interoperability
There are numerous Blockchains and distributed ledgers available, making interoperability essential.
As a result, many networks exist to enable smooth interconnection and safe data transmission, allowing data to move smoothly across multiple systems.
Now, over to the blockchain models.
Blockchain Models
Blockchains are classified into four types based on their application and requirements:
- Public blockchains
- Private blockchains
- Hybrid blockchains
- Consortium blockchains
Each of these Blockchain networks serves a specific purpose and addresses a particular problem. Each Blockchain has distinct features and advantages over the others, which we will explore below.
We would discuss hybrid blockchains before we see the other types of blockchain models.
Hybrid Blockchains
Hybrid Blockchains are a blockchain network that combines public and private networks.
It combines the most significant features of both networks, allowing for decentralization, transparency, and immutability similar to public Blockchain.
The Hybrid Blockchains network includes some features of private blockchains, such as faster transaction processing and more privacy.
Hybrid Blockchains contain confidential transactions and sensitive data on a private network accessible only to authorized participants such as consortiums or enterprises.
Less sensitive data, on the other hand, will be housed on the public Blockchain, promoting inclusion and transparency.
Hybrid Blockchains benefit businesses such as healthcare, banking, and supply chain management, which require regulatory compliance and safe data processing.
Use Cases of Hybrid Blockchains
Some ways hybrid blockchains can be used are;
- Hybrid blockchains improve the traceability and transparency of items in supply chain management while protecting confidential corporate data from public view.
- Hybrid blockchains allow for smooth and safe cross-border transactions while restricting financial information within the network.
- Hybrid blockchains enable a tamper-proof and transparent voting system that protects vote choice and voter identities.
- Hybrid blockchains can help secure and decentralized marketplaces for purchasing and selling in-game digital goods and assets.
- Hybrid blockchains facilitate property transactions while ensuring transparency in property ownership and safeguarding confidential financial information.
Advantages of Hybrid Blockchains
Here are some advantages of hybrid blockchains.
- The combination of public and private networks increases scalability by accommodating more transactions.
- The hybrid blockchains allow enterprises to modify their blockchain infrastructure to correspond with their specific use cases, providing greater flexibility than a traditional solution.
- Using a blend of public and private networks would be less expensive than implementing a fully private blockchain network.
- Hybrid blockchains help to build trust among participants by striking a balance between data confidentiality and transparency.
- Private chains process transactions faster than public blockchains, which improves overall system speed.
Disadvantages of Hybrid Blockchains
Despite it’s many advantages, some disadvantages of hybrid blockchains are as follows:
- Hybrid blockchains complicate the overall design and necessitate proper integration and synchronization between private and public components.
- Hybrid blockchains may have potential attack vectors because private and public chains must be secured appropriately.
- The combination of private and public parts may cause regulatory difficulties, notably around data privacy and compliance in associated sectors.
Now, let us see the features and properties of the other blockchain models. We will start with public blockchains.
Public Blockchains
This Blockchain is a permissionless, non-restrictive, distributed ledger system, which implies that anyone with an internet connection can join and contribute to a Blockchain network.
The primary application of such Blockchain is to exchange bitcoins and mine.
In addition, it maintains confidence throughout the user community by incentivizing everyone in the network to contribute to improving the public network.
The first example of a public Blockchain is Bitcoin, which allows anybody to transact. Litcoin, Solana, Avalanche, and Ethereum are all examples of public blockchains.
Use Cases of Public Blockchains
Here are some use cases of public blockchains.
- Public blockchains are used to mine and exchange cryptocurrencies like Ethereum and Bitcoin, allowing users to deal with no intermediaries such as banks.
- These are also used in decentralized financial systems to provide customers with various services like borrowing, lending, decentralized exchanges (DEXs), yield farming, and stablecoins.
- Public blockchains help track and verify supply chain operations while maintaining traceability, validity, etc.
- These can be employed in creating and trading NFTs, such as digital arts and in-game assets, that have proven ownership and scarcity.
- It supports programmable smart contracts, also known as self-executing agreements with specified laws, which are helpful for process automation without intermediaries.
Advantages of Public Blockchains
Some advantages of this blockchain include;
- Since there is no central authority, it is immune to censorship and has just one point of failure.
- Transparency is high since all transactions are available to the public, which increases trust and accountability.
- The vast network of nodes ensures excellent security and a robust consensus process.
- Anyone can join the network, which encourages creativity and inclusion.
- Users are paid to maintain and validate the Blockchain, promoting network sustainability.
Disadvantages of Public Blockchains
- During peak network traffic, public blockchains may charge massive transaction fees.
- The PoW consensus technique employed in some public blockchains, such as Bitcoin, necessitates significant computational power and causes numerous environmental difficulties.
- Due to their openness, public blockchains may contradict regulatory requirements in some locations, making it difficult to comply with local legislation.
Up next, let us see Private blockchains.
Private Blockchains
Private blockchains only allow participants who have provided authorized and authenticated information.
This distributed ledger system operates within a controlled network, with a select number of players and limited access.
Public blockchains are open to anyone, but private blockchains are permissioned, allowing only pre-approved participants.
Private blockchains allow enterprises more significant control over all data and operations, making them compliant with industry rules and other policies.
In addition, because there are fewer players, the consensus mechanism is speedier and more efficient than on a public blockchain.
It makes private Blockchain appropriate for enterprise-level apps requiring maximum secrecy and speed.
Above all, private blockchains provide increased security because they are only accessible to a limited number of members, reducing the risk of unauthorized access and other potential risks.
Use Cases of Private Blockchains
Some ways private blockchains can be used include:
- Financial institutions prefer to use private Blockchain to manage cross-border payments, trade settlements, and remittances. It offers them speedier transactions and secure data sharing.
- The government uses private Blockchain to retain citizen information, verify identity, and monitor property ownership efficiently and securely.
- ERP systems that interface with private blockchain help firms manage supply chains, financial operations, inventories, data integrity, and redundancy.
- It promotes collaboration across many organizations or consortiums, allowing them to share secret data and automate work procedures.
- Private blockchains facilitate virtual assets in the gaming industry while ensuring safe ownership and peer-to-peer trading.
Advantages of Private Blockchains
Here are some advantages of private blockchains.
- It limits access to only trusted participants, reducing the risk of unauthorized entrance and potential assaults.
- Transactions will be faster and more efficient, with improved data confidentiality and privacy.
- A private blockchain can be tailored to meet corporate requirements.
- Compared to public blockchains, having fewer validators and nodes reduces operational costs.
- Smaller network sizes lead to more efficient consensus methods.
Disadvantages of Private Blockchains
- Decentralization is reduced due to limited participants.
- If any of the selected validators or authorized nodes malfunctions or compromises, there may be a single point of failure in the system.
- Due to significant investments in administration and infrastructure, creating and maintaining a private blockchain can increase the cost of developing Blockchain apps.
Finally, let us examine consortium blockchains.
Consortium Blockchains
Consortium Blockchain network functions as a distributed ledger system incorporating private and public blockchain network features.
In this network, trustworthy and pre-selected members, such as organizations, businesses, or government agencies, work together to maintain and authorize the Blockchain.
Unlike public blockchains, accessible to all, and private blockchains, which a single institution governs, the Consortium Blockchain network offers a middle ground.
It enables consortium members to share confidential data while maintaining openness and decentralization safely.
The consortium blockchain governance model comprises a consensus process agreed upon by the active individuals to allow approved transactions to be added to the Blockchain ledger transparently.
It leads to increased trust and a lower likelihood of malicious operations. Consortium blockchains combine the decentralization benefits of public blockchains and the regulated access required for commercial applications.
Use Cases of Consortium Blockchain
- Financial institutions, banks, and other payment processors can collaborate on a consortium blockchain to manage cross-border payments, enable real-time and secure settlements, and improve KYC procedures.
- Healthcare providers, researchers, and insurers can securely communicate medical records, patient data, and research findings, ensuring data protection and regulatory compliance.
- In international trade, consortium blockchains can facilitate trade finance processes by providing an immutable and transparent transaction record, minimizing the risk of fraud, and increasing participant trust.
- Consortium blockchains can support supply chain financing by providing lenders with a consistent transaction data source, reducing risk, and allowing suppliers to access working assets faster.
- Private and government entities can collaborate on a consortium blockchain network to create an interoperable and secure identity management system that enhances user privacy and reduces identity theft risk.
Advantages of Consortium Blockchains
Consortium blockchains have some distinct advantages. They include:
- Restricted access to trusted people protects sensitive data and reduces the danger of unwanted access or assaults.
- The Consortium has a smaller collection of validators; thus, its consensus mechanism can be speedier and more efficient, resulting in higher scalability.
- Less reliance on complex PoW (proof of work) or consensus algorithms results in cheaper transaction costs and energy consumption.
- This network makes it easier for enterprises to collaborate and share data, resulting in better workflow management and interoperability overall.
- The Consortium Blockchain network can be tailored to meet the individual needs of participants, making it simple to implement industry-specific use cases.
Disadvantages of Consortium Blockchains
Here are the disadvantages of consortium blockchains.
- Decisions about consensus processes, updates, and network regulations require agreement among consortium members, which may result in governance disagreements and disruptions in change execution.
- While consortium blockchains give more privacy than public blockchains, they may result in less transparency for external stakeholders and auditors. It makes data accuracy verification more difficult on the Blockchain.
- When powerful entities control the Consortium, collusion is always possible in negotiating the network’s justice and neutrality.
Final Thoughts
In this article, we walked you through the features and properties of hybrid blockchains and the other types of blockchain models.
If you are still trying to compare to see which one of the models is the best, I would advise that you study each model’s features specifically and see which one aligns the most with your precise needs.