Types of Blockchain; Private vs Public, Federated vs Hybrid - CoinGyan

Types of Blockchain; Private vs Public, Federated vs Hybrid, what suits your use case?

Blockchain is revolutionary, no doubt. However, the question lies in choosing the type of blockchain that suits your use case. Although the two broad types of blockchain are public and private, however, they have other varieties called: federated and hybrid blockchain. Concurrently, these articles will make reference to public and private Blockchain before sharing in detail about hybrid vs federated blockchain.

Meanwhile, it will be interesting to have a recap or a background of what blockchain is before diving deep into the various blockchains types and variations. A good understanding will help industrial players to choose accordingly.

First things about Blockchain

The concept of blockchain is to solve the Byzantine Generals Problems (BGP) in a distributed network. A BGP is a problem of trust and transparency within a distributed network. Therefore, a pseudo-anonymous entity or entities, called Satoshi Nakamoto, made the first implementation of blockchain. The invention became popular when the entity or group published a white paper called; “A peer-to-peer electronic system” in October 2008. He referred to the peer to peer system like the Bitcoin blockchain, an open-source network that enables trustless peer to peer transactions.  Hence, people often generalize bitcoin as a blockchain.

Regardless, Bitcoin has its own blockchain, an open-source, public, and permissionless blockchain, but it shouldn’t be a general name to other blockchains. Therefore, let it be clear that Bitcoin is only an example of Blockchains like EOS, Ethereum, NEO, Cosmos, Ontology, Polkadot, and many others.

In fact, as of May 2019, CoinMarketCap data shows that there are over 861 cryptocurrencies with independent blockchains. However, the various blockchains have unique designs, architecture, and solutions for different use cases. Concurrently, each type of blockchain as well as their variation has suiting designs and architecture that support some applications. For example, a system that needed the public to have access to data has a different design and architecture from ones that deal with sensitive data.

Nonetheless, the definition of blockchain is relative. However, there are common definitions around. According to Crypto-current:

“Blockchain is a decentralized, distributed database, consisting of records called blocks used to record transactions across many nodes so that any block involved cannot be altered retroactively, without the alteration of all subsequent blocks.”

Classifications of Blockchain

There are several ways of classifying blockchain. However, a few will be necessary for distinguishing between hybrid and federated blockchain. They include;

Governance framework

Like the traditional network where the board of directors makes all decisions, the blockchain has a choice of who contributes, makes the decision, secures, and possibly participates on the network. Therefore, governance talks about who is responsible for decision making on the network.

Therefore, when decision making on the blockchain is left for the public, that is a public blockchain. On the contrary, when a specific group of people makes decisions, it is called a private blockchain. However, hybrid and federated blockchain governance come in between the public and private governance model.

Concurrently, they allow a consortium or group in the federated blockchain. Similarly, hybrid operates a diverse kind of governance that suits the use case while leveraging on the strength of public and private network type.

Distributed ledger model

Let’s start by knowing what a distributed ledger technology, the bedrock of blockchain functionalities is. Consider a record book or ledger of employee data, then think of how the staff or a group of staff could falsify it.so for you to keep it safe, the ledger must be private.  Consequently, a distributed ledger prevents staff members or anyone from tampering as well as enabling transparency of data.

Therefore, according to the distributed ledger model, there are permissioned and permissionless blockchain. However, public and private blockchain can be permissioned or permissionless. In contrast, hybrid and federated blockchain are restrictive. Hence, are predominantly private to the decision-maker and parties assigned.

Public Vs Private Blockchain.

Since we have established that hybrid and federated blockchains are a subset of a public and private blockchain, it is imperative to have a look at them. However, the key differences are incentive mechanisms, consensus, accessibility, and transparency level.

Private and public blockchain

From a general perspective, a private blockchain is open to a certain group of people. On the other hand, the public blockchain is open to everyone. Meanwhile, they could be permissioned or permissionless depending on the participation level. Hence, their level of incentive, consensus, accessibility, and transparency is dependent on who accesses and participates in the network.

Private Public
Transaction per second Higher High
Centralization Partial Decentralized
Open and transparent No Yes
Trust Less Higher
Scalability Higher Lower
Examples Corda, Fabric, etc. Bitcoin, Ethereum, NEO, Waves, etc.

Hybrid and Federated blockchain; the variations.

Hybrid blockchain and federated blockchain are almost the same. However, they are slightly different according to who accesses the network, decision-makers, scalability, speed, and decentralization.

A hybrid blockchain is a combination of a private and public blockchain. Hence, it operates a multi-layer architecture to achieve a specific use case. By implication, it is leveraging on the benefit of one over another to build a trustless, secured, and transparent system. For instance, it entails generating hashed data blocks on the private network and storing them on the public network without compromising privacy while optimizing transparency and security.

On the other hand, federate blockchain is simply a private blockchain where a group of persons makes decisions. Unlike hybrids that could be private and public in some aspects, it is only public to the consortium. Concurrently, it is a preferred blockchain for use cases that require sensitive data and operations.

Benefits Of Federated Blockchain

 Here are some benefits that you can expect from Federated Blockchain platforms.

  • It saves cost
    The basic idea of being part of a Federated Blockchain is to cut costs. Therefore, you should go for the one that offers the most cost-saving feature for your business.
  • The participants share the risk involved
    This is another great benefit of Federated Blockchain. You should seek a platform where all participating companies will share the risk in case of a new Blockchain solution. The relatively “new” nature of Blockchain means there are lots of risks associated with it in the market.
  • Gradual mass adoption
    As more companies are coming together under a Federated Blockchain platform, it helps to drive mass adoption. Mass adoption helps your company to reach new heights easily.

Comparative advantages

Below is a table that compares the basic characteristics of hybrid and federated blockchain;

  Hybrid Federated
Scalability Higher Lower
Security Higher High
Decentralization Higher Lower
Speed Fast Faster
Examples Dragonchain, R3, Energy Web Foundation, etc
Trust High Higher
Privacy Good Better

Use Cases of Hybrid Blockchain

  • Supply Chain
    Hybrid Blockchain can be a great help to supply chain networks because of the large nature of the supply chain. The supply chain needs to be neither private nor public Blockchain but a combination of both. The IBM Food Trust is one big example of the use case of Hybrid Blockchain in the supply chain.
  • The Banking Industry
    Hybrid Blockchain is an ideal solution to most of the challenges we experience in the banking sector. As the banking industry needs to solve internal problems and also secure user information, the need for Hybrid Blockchain becomes more imperative.
  • Government processes
    Hybrid Blockchain can help make government processes more efficient. The government can leverage Hybrid Blockchain to create a public identification database, conduct elections, provide both social and humanitarian assistance, etc.

Summary.

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There are several blockchain networks in existence, including but not limited to Bitcoin, Ethereum, Waves, among others. What started as a financial service enabler has spread to various use cases and now categorized into four different types; private, public, hybrid, federated blockchain. Meanwhile, federated and hybrid are variations of private and public.blockchain to suit some use cases. According to ‘TheNextWeb”, over 92% of over  26,000 blockchain projects launched in 2016 failed. However, that could be because of a lack of diligence to know what type of blockchain works for them.

 

Jatin

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