Did you know that there are different types of blockchain technology?
That’s right. The blockchain does not refer to one specific type of blockchain. However, its use is mostly synonymous with cryptocurrency.
Anyway, this article will cover the different types of blockchain and explain the type of blockchain that Bitcoin uses for transactions.
What type of blockchain does Bitcoin use?
To answer the question, Bitcoin uses a public blockchain. As the name implies, this type of blockchain is available for use by the public.
Users only need an internet connection to access this blockchain. Once they access this blockchain, users can access historic records, verify all transactions, and even do any proof of work necessary for the blockchain to function.
Is a public blockchain secure?
The security of the public blockchain depends on the encryption and verification protocols of the blockchain. If the blockchain has good encryption and strong verification protocols, then a public blockchain is very secure.
In fact, a public blockchain with good encryption and verification protocols is much more secure than other types of blockchains because all activity can be verified by a third party.
In other words, a top-notch development team is paramount to ensuring that a public blockchain remains secure.
On a positive note, a public blockchain that is not secure would likely not last very long because many users would leave after the first security breach.
What are the other types of blockchain?
Now that we have covered the type of blockchain that Bitcoin uses; it’s time to explain the other types of blockchains. There are four types of blockchain used today. They are the private blockchain, public blockchain, consortium blockchain, and hybrid blockchain.
A private blockchain is much more common that you probably would have guessed. But there’s one caveat.
Private blockchains are used in closed networks.
For instance, many large corporations will use a private blockchain to manage different business operations. They’re especially common to manage the supply chain or other aspects of logistics.
As for the functionality of a private blockchain, it’s practically the same as the public blockchain with its use of mining, transactions, verifications, and so on. The only difference is that the private blockchain grants different users different permissions.
Private blockchain examples?
Many companies build their own blockchain network in-house. Some examples include Amazon, Google, and Goldman-Sachs. There are also private blockchain enterprise solutions such as Sawtooth, Fabric, and Corda.
We already covered the public blockchain earlier. For reference, the public blockchain operates on a decentralized basis with users across the world providing the computing power to conduct transactions on the blockchain.
Users that provide the computing power for the blockchain do so by running a script on their computer that verifies the transactions of users. Each transaction is required to have a certain number of verifications, which eliminates the potential for abuse.
The users powering the blockchain are referred to as miners. They are rewarded a certain amount of cryptocurrency in exchange for mining the blockchain.
It might sound unusual and open for attack, but Bitcoin (the most popular user of a public blockchain) has never been hacked.
Public blockchain examples?
Bitcoin, Monero, Litecoin, Ethereum, and most other cryptocurrencies use blockchain technology.
A consortium blockchain is similar to a private blockchain. However, there is one critical difference.
Instead of being managed by one central organization, a consortium blockchain is managed by two or more organizations.
This usually means different business or sectors of government have access to the blockchain to make communication between the two much faster.
Consortium blockchain examples?
Governments and banks will use a consortium blockchain if they use a blockchain. It’s especially useful for banks because they must communicate with the central bank on a regular basis.
As the name implies, a hybrid blockchain is a combination of a private blockchain and a public blockchain. What does this mean?
There are parts of the blockchain that are available to the public. For instance, the public might see the blockchain, but not have permission to modify the blockchain. Or there might be certain transactions that remain private.
This has some advantages. Mainly that security tends to be less on the private blockchain, which increases speed and reduces fees for those transactions that do not need to be public.
Hybrid blockchain examples?
Hybrid blockchains aren’t that common. But one example of a hybrid blockchain is Dragonchain.
Which blockchain is the best?
The main difference between the blockchains is whether they are public blockchains or private blockchains. Hybrid blockchains do exist to some extent, but the real difference comes down to whether a blockchain has private aspects to it.
Most experts and users agree that public blockchains are superior.
Why are public blockchains better than private blockchains?
They are better for a few reasons, but it mostly comes down to trust.
A public blockchain makes all transactions and historic records public, so anyone can view any transaction to ensure that nothing wrong has occurred. If a problem does arise, then it’s simple enough to trace the origin because the record is public.
With a private blockchain, you must trust that the central organization is legitimate. And many people simply don’t have that level of trust in central organizations.
Other reasons that public blockchains are superior include the following:
A public blockchain must have strong security or it will not last long. With that in mind, Bitcoin has been using a public blockchain for 11 years with no security breaches or other issues with the blockchain itself, so it’s safe to assume that Bitcoin is secure.
Another huge advantage of a public blockchain is that it’s decentralized because everyone has access to it and has the ability to power it themselves.
This means no central authority can reverse a transaction on it has been verified.
The same cannot be said about a private blockchain – the central authority of a private blockchain can reverse a transaction if they want. And no one would even know about it because the entire blockchain is private.