What are the Different Types of Blockchain Networks?

Many intermediaries, from banks to shippers to retailers, depending on the data they exchange daily. You can visit https://bitindexai.top/ to get 100% control over your money while trading in bitcoin.  But for organizations to successfully deploy blockchain for their own supply chain needs and desires, they must understand what network topology best fits their use case and how the different types compare.

 The below-mentioned portion will detail the differences between public and private networks, decentralized and centralized systems, and anonymous networks versus pseudonymous networks. 

You’ll also learn about each type’s limitations in terms of scalability or transaction latency before you decide which model is most suitable for your enterprise needs. 

Private Network

A private or consortium network is where nodes are all trusted to follow specific rules and protocols, some of which may also be enforced by third parties like intermediaries. These trusted members control access to the data and ensure that all participants’ transactions are protected against fraud or unauthorized access. 

Participants must also comply with the consortium’s rules for their transaction to be valid, including collecting information about their business partner and delivery details. This type of network is one of the most widely used and has been in use for several decades. For example, the UN’s International Organization for Standardization (ISO) creates and maintains standards for conducting global business activities adopted by many private and public organizations worldwide.

 This type of network has distinct advantages over others because it allows multiple parties to interact without relying on third parties or trusted intermediaries. However, as an organization expands its use cases and requires a more scalable solution, a consortium may not be able to keep up with growing transaction volumes and increased security requirements without increasing the number of participants or investing more in maintenance costs, which can be pretty significant.

Operating a private network is not without its share of challenges, though.

Private networks require significant capital expenditures before they can be initiated.  New participants must be vetted, which is time-consuming and requires significant resources. 

Business processes may require different rules and tiered access to information, which can cause conflict among participants. For example, a private network could be subject to regulatory pressures if it has information about specific types of data or is moving assets in a certain way that might cause concern for regulators.

Public Network

Users created a public blockchain platform like Ethereum to allow anyone to build decentralized applications (Dapps). This model of a public blockchain makes it much more scalable than a private network, and it also makes it more transparent. A public network is also called a permissionless distributed ledger and can be described as a record book that everyone can access. 

Unlike the private network model, this type of blockchain doesn’t require any financial or legal commitments upon joining because there are no rules participants must follow to participate. With public networks, the type of information available gets shared publicly among all users.

 Therefore, you see information about Dapps being made available on websites like DappRadar, allowing people to see where Dapps are coming from and using filtering mechanisms to determine their common characteristics. Private and public blockchain networks have several differences. For example, in a public ledger, anyone can join and participate, whereas, in a private network, participants need permission to access the ledger. 

There’s also the issue of trust, for example. If you join a small network with trusted partners, it can be more challenging to know if you can trust them. But, on the other hand, if you join an open network like this one (Ethereum), there is more transparency about who owns what and where the transactions are coming from as well as going.

These two types of networks are very similar in using cryptography to process transactions between members. On the other hand, a private network requires permission from at least one consortium member to join or utilize certain functions. 

Pseudonymous vs Anonymous Networks

If you’re familiar with blockchain technology and cryptocurrencies, you may have heard of some privacy tokens issued (like Monero). When people use privacy mechanisms like these to protect information about their transactions (or monetary value), they’re called “anonymous networks”. The goal of a private network is to make it possible for participants to send and receive information without anyone (including the sender or receiver), distinguishing what information is being communicated and associating it with any person or entity.

 Anonymous networks can correspondingly lie under the category of “pseudonymous” networks because they can be used by anyone but are not necessarily truly anonymous. For example, if an organization has one member in a private network and then invites members into another network, their identity could be revealed by looking at their transaction history.