A Comparison Of Various Blockchain Protocols

With the evolution of blockchain technology, various new decentralized platforms have surfaced now with distinctive features. Therefore, it is complex to analyze and decide which is the most suited one per the need of the business. Shortlisting and then selecting one appropriate blockchain protocol requires a lot of research, analysis and comparison. A parallel comparison of the blockchain platforms is important for the evaluation of the variety of features that they offer.

The implementation of blockchain technology initially began with Bitcoin. Blockchain used for the functioning of Bitcoin was a basic distributed ledger mechanism that would record the Bitcoin transactions. Bitcoin was a basic public chain; however, with time, Blockchain protocols evolved, and currently, there are four fundamental types of blockchain protocols:

• Public blockchains
• Private blockchains
• Hybrid blockchains
• Consortium blockchains

Blockchain technology, with its various types, serves as an encrypted repository of digital data. It functions and is maintained on the basis of the consensus mechanisms, distributed, decentralized and autonomous network of computers. With the help of a blockchain network, transactions are secured with the help of consensus mechanisms. For instance, the horizontal Proof-of-History keeps a track of the transaction process completely, thus, eliminating any sort of fraudulent activities on the network.

With timely evolution and upgrades, there are generations of blockchains with different capabilities like transactions, cryptocurrency, microtransactions, smart contracts, DAO, dApps, scalability, governance, tokenization efficiency and interoperability.

This article is a systematic breakdown of the various type of blockchains along with a parallel comparison for the comprehension of all the features they provide.

• What are the various types of blockchains?
• What are the fundamentals of blockchain technology?
• What are the use cases of blockchain?
• Parallel comparison of various blockchain networks

What are the various types of blockchains?

With businesses and start-ups increasingly integrating blockchain into their organization’s systems, the decentralized technology has been categorized into four main types based on its use cases:

Public blockchain

Public blockchains are open-source blockchain networks. They allow everybody to be a part of the network as users, developers, network members and miners. Public blockchains are open for equal participation from all the members without any restriction. Transactions being processed on the public blockchain are completely transparent and accessible to all the parties of the network for examining the details of it.

A public blockchain is fully decentralized in nature, with no central authority in power. It is extremely censorship-resistant as anybody can join the network as per their wish, irrespective of the location and nationality. Therefore, public blockchains can never be shut down.

Private blockchain

Private blockchains are permissioned blockchains. People need permission to join these blockchains. Transaction on the private blockchains are private in nature and are only accessible to the network participants who have the permission to function on the private blockchain.

These blockchains are important for the enterprises that collaborate and share their data, but they do not want to indulge their confidential business data in the processes on a public blockchain. A private blockchain is way more centralized in nature as the various entities of the network are running the chain, thus having equal control over various participants and the structures of governance.

Hybrid blockchain

A hybrid blockchain has an ecosystem with the combined features of both a public and a private blockchain network. This explains that the hybrid blockchain contains the privacy and security of the private blockchain along with the transparency of the public blockchain. Thus, a hybrid blockchain powers the flexibility of a business operation by providing the privacy and choice to put up any data publicly as per their convenience.

The hybrid ecosystem is possible because of the patented interchain feature. This feature allows the chain to connect with other blockchain protocols. With the help of a hybrid mechanism, the formation of a multi-chain network is easily possible. As they have the ability to run different public blockchains in a single go to increase the privacy of the transactions, they leverage the combined hashpower being utilized for the public chains.

Consortium blockchain

Consortium blockchains are also known as federated blockchains. They allow any new participant on the block to connect the established structure and share data instead of beginning from the very start. With the help of consortium blockchains, organizations conveniently get solutions to secure their time and the cost of development.

There are various advantages of the consortium blockchain like the validation, control, security, economically feasible, flexibility and energy required for the process of mining. Industries like logistics, healthcare & insurance, banking & finance implement the consortium blockchain.

Now that we are familiar with the four types of blockchains, let’s dive deeper into the features of the blockchain.

What are the fundamentals of blockchain technology?

The various fundamental features of decentralized blockchain technology are as follows:

Consensus Mechanism

Blockchains have a secure and fault-tolerant mechanism that is utilized to attain agreement on every block state of the blockchain ecosystem. The entire process of the consensus mechanism includes validating and authenticating every transaction that takes place on the network.

In simple words, consensus makes sure that the data on-chain getting saved in the ledger is valid and not tampered with. There are various consensus mechanisms like the Proof-of-Work (PoW), Proof-of-Stake (PoS), Proof-of-History (PoH), voting-based consensus, leader-based consensus, economy-based consensus, Proof-of-Authority (PoA) and Virtual Voting consensus to check on the accuracy of data and the malicious behaviour of any validator or miner on-chain.

Block Time

Block time refers to the amount of time it takes in a new block creation on a blockchain platform. Transactions on a blockchain are broadcasted instantly but they are not trusted till they are linked to the next block in the series of the chain. Therefore, a low block time is always required for quick validation of the transactions, so that the network nodes do not have to wait for a long to confirm the transaction.

Transaction rate per second

TPS or the transaction per second in the blockchain is the number of transactions calculated for each block. A higher TPS indicates good network bandwidth in the blockchain.

Scalability

Scalability in blockchain refers to a network’s ability to handle a larger number of transactions in case of high throughput. Blockchain scalability is the capacity of the blockchain ecosystem to process the increased number of transactions and data in order to minimize latency and bootstrap time.

With different types of blockchain, the throughputs of them also differ, hence affecting the scalability factor of the platforms. When a blockchain platform has high scalability, it means that the platform has increased transactions per second as compared to the other blockchains.

Immutability

One of the most important components of a blockchain platform is forming an immutable ledger. It is convenient to hack and tamper the centralized databases as they require third-parties trust for securing them. But when it comes to the distributed ledger of the blockchain, it is impossible to alter any data on the blocks once they are written and saved on-chain. Therefore, the blockchain is immutable in nature and offers exclusive auditing when required.

Gas Fee

Gas fees or the transaction fees in the blockchain is the amount paid by the users for their transactions to the miners to get them included on the blocks. The gas fees system functions on the basis of a demand and supply mechanism.

If the throughput is high and the demand for the transactions is more, then the miners will opt to include the transactions that are paying more gas fees as compared to the others. In case of high throughput the gas fee increases as per the demand-supply structure, thus compelling the users on-chain to pay more for quick processing of their transactions.

Auditability

As the distributed blockchain technology is immutable in nature and is resistant to any sort of tampering of the database, it is held accountable for true and verified data of the processed transactions.

Therefore, blockchain helps in auditing the data. Instead of looking for various bank statements, auditors get the liberty of verifying the transactions directly from the immutable ledger that is available for the public view.

Trust and security

In the blockchain, we do not rely on intermediaries and directly function in a decentralized manner. Intermediaries charge some amount of fees for building trust between various parties. By scattering data across the platform, blockchain eliminates the central authority or administrator. Thus, in blockchain, the trust is built using the consensus protocols, where all the network nodes validate the transaction.

Transparency

Blockchain has a high level of security and transparency, as it provides the details of the transaction to all parties involved in the transaction. Every participant of the blockchain platform will have easy access to the details of the transactions processed on the blockchain network.

Now let’s understand the different use cases that differentiate the various blockchain platforms.

What are the use cases of blockchain?

There are various use cases of a blockchain in business as mentioned below:

Smart contracts

Smart contracts are digital contracts that are written in codes and are self-executory in nature when some specific conditions of the platform are met. They are stored on the blockchain platform and are executed in an immutable and decentralized way. Therefore, smart contracts have codes that are unalterable once they are written. they function in the form of an agreement between two parties who engage in a transaction or trade taking place on the blockchain platform.

Decentralized applications or dApps

Decentralized applications built on blockchain are applications or programs that are run on P2P networks. dApps use smart contracts in the form of backends. With the help of a dApp layer in blockchain networks, good user experience and privacy in inculcated.

Different blockchains have their own dApps and some dApps are also interoperable in nature which means that function across different networks. dApps have immutable codes hence they are extremely secured and the codes can never be tampered. When executed by the active chain nodes of the blockchains, the dApps run with zero downtime. With the help of dApps, you can compute in a trustless and secure manner as the dApps are resistant to any central authority or censorship.

Decentralized exchanges or DEX

DEX are open exchange markets for assets based on blockchain. These markets directly connect the traders and eliminate the middlemen. DEX platforms utilize their immutable codes to secure transactions. There are various decentralized exchanges based on different blockchain protocols.

Decentralized Finance or DeFi

Another use case of blockchain in decentralized finance. This includes lending, borrowing, insurance, asset trading, etc. DeFi focuses on eliminating the intermediaries and building a financial platform that is transparent, open-source, permissionless and is autonomous in nature.

With various DeFi platforms, people can take control of their assets and conduct various transactions finance activities based on P2P networks like borrowing funds, crypto trade, earning high interests, monitoring price fluctuation on the blockchain-based assets.

Identity management

Various distributed ledgers have upgraded methods for scrutinizing the identity to verify who you actually are. Various blockchains are used for digitally storing identity documents. Thus, with the implementation of blockchain in identity monitoring and management, privacy is increased. Since the identity data is stored in the decentralized database, there is no central point of failure ever.

Now that we are familiar with the various use cases, let’s proceed towards the parallel comparison of different blockchains.