Blockchain is the new trending technology in the market, many companies start to implement it to solve multiple problems. Usually, this technology manages the different types of user information related ...
When we start talking about securing Blockchain technology, people always think about Bitcoin. However, Bitcoin is only one implementation of one of the Blockchain types. Therefore, to be able to correctly secure those systems you should understand the characteristics of each Blockchain type. So what are the three types of Blockchain?
Actually, Blockchain technology has more than 3 types. The previously listed types are only the most popular ones. However, here is the list of the other types of Blockchain technology:
Knowing the existing Blockchain types will give the security expert the ability to better understand the borders of his target and detect their weaknesses. Therefore, in this blog post, we are going to explain in detail how each one of the Blockchain types works and when can be used with a reel example of such implementation. So if you are interested in knowing more about those aspects just keep reading.
Basically, Blockchain technology can be divided into two big categories, Permissionless and Permissioned Blockchain. Choosing one of them depends on the use case of the Blockchain. Here is a beautiful illustration made by foley.com team of this categorization to better understand it:
The permissionless Blockchain is a category where everyone on the internet could join the network and be part of it without any previous authorization from anyone. This category of blockchain tends to be more secure as the number of nodes that validate the transactions is high. However, this aspect increases the time needed for transactions processing.
The permissionless blockchain structure gives it better transparency compared to the permissioned blockchains where the transparency is controlled and limited in some cases. Blockchain networks that fall into this category are most of the time anonymous. However, this does not mean untraceable.
The fact that this category of blockchain does not require any central authority to perform any management operation like authorizing newer nodes, the decentralization principle is truly applied. This aspect, make the extension of those networks way more natural and easy than the permissioned networks.
Unfortunately, with all those benefits of the permissionless blockchain, and with more nodes added to the popular network across the world, we started to notice some pitfalls. The first and major one is their energy consumption. Running the consensus algorithms especially those of proof of work tend to consume more and more energy which makes a huge negative impact on the environment. Even with the innovation in this field by creating some specific less energy consumption technology, more of the network nodes still work with older technologies.
By design, the permissionless category of Blockchain does not respect any privacy aspect which makes it very transparent in terms of a transaction as everyone could easily verify any transaction that has happened in the network. However, knowing all the history of the Blockchain transactions does not mean knowing who launched the transaction by name.
Let’s take Bitcoin as an example, unless you convert or you buy a reel think with your Bitcoin money, there is no way someone could know who owns a Bitcoin. This comes from the fact that the Blockchain does not store any information about the owners of the Bitcoin apart from their wallets Id.
The permissioned Blockchain category is the one where nodes are limited and known by a central organization or multiple organizations. The idea here is that accessing the network is conditioned by receiving either an invitation from the central node in the network or being part of its founders.
Actually, those Permissioned Blockchains are usually used by a financial organization that wants to have clear control over the network and its transactions.
The limited number of nodes in this category of blockchain gives them the ability to not use any consensus algorithm as the nodes that validate the transaction are already well known by each one in the network. Not using a consensus means even not being in need of miners. All those parameters help in reducing both the time to process a transaction and the energy consumption.
As the Blockchain in this situation is controlled, it is very difficult to keep real transparency. This aspect could also be controlled by the nodes responsible for validating the transactions and all the transactions are not anonymous.
You should know that even with all this control, the decentralization aspect of the Blockchain is still applied in this category too. The only difference here is that this decentralization is incremental due to the controlled access to the Blockchain, contrarily to a Permissionless Blockchain.
Unfortunately, this limitation in the number of nodes reduces the security of the data and the fact that it can be modified. Moreover, in some situations when the access to the Blockchain is controlled by only one node in the network, causing a DoS to the network becomes feasible. Shutting down the central node responsible for the access will cause this.
However, you should make the difference between a permissioned Blockchain and a Private one. A permissioned Blockchain does not have to be a private one. We can have a public network with Permissioned access, you can imagine it as a Facebook group with rules to get access to it. Therefore, everyone has access to the network but with conditions.
Here is a list of some of the most popular Permissioned Blockchains:
Here is a table that summaries all the differences between those types of blockchain:
|Enterprise Ethereum Alliance, R3
|Xinfin, IBM food trust
|Better suit for
|Big organizations and governments
|Big organizations and governments
|Big organizations and governments
For more details and explanations about each type, please continue to read.
As the name suggests, a public blockchain is an open network where everyone can get access to it and be a node. All the participants of the public blockchain maintain a copy of the blockchain ledger and participate in the validation of the transaction. You can deduce from this that the public blockchain can be classified as a permissionless blockchain.
Bitcoin is the first and most popular public Blockchain, and it is based on the Proof-of-work consensus to ensure the security of the network and reward its participant for Bitcoin each time they validate a block.
Being part of a public Blockchain does not always mean being rewarded for transactions validation or anything you do for the Blockchain community.
The public Blockchain offers better security compared to the other types of Blockchain, because of the unlimited number of nodes that can join the network. This means that so many nodes in the network would have a copy of the ledgers so the data will never be lost. Moreover, more nodes will participate in the validation of the transactions.
This aspect creates great transparency between the nodes and the users of the network, as everyone in the network can get the whole history of every transaction.
However, this power of quick scalability and security comes at the cost of being less efficient in terms of transaction validation.
The first idea of the blockchain was to create a global decentralized cryptocurrency to avoid all the fees that get generated when people want to send money to each other due to intermediaries. However, with the global adoption of the blockchain, a lot of scalability problems were discovered and the main one was that the transactions may take more time to validate compared to a private or the other types of blockchains. Moreover, the fees to validate those transactions get higher and become just intolerable.
Unfortunately, the public blockchain cons do not stop here. Most of the public popular blockchains use consensus algorithms that consume so much energy and hurt the environment. Even if there is so much research and innovations in the aspect, the old processors and algorithms are still adopted.
The Private blockchains are totally different from the public blockchain. In this type of blockchain, participation in the network is restricted and all the nodes in the blockchain are known and authorized by one central authority. Therefore, private Blockchains are an example of permissioned blockchain.
The private Blockchain restrictions help the network to avoid using any consensus algorithm to validate the transaction which drastically reduces the time needed for transactions to be validated. However, this does not mean that all private blockchains do not have a consensus algorithm. Even if the joining process for new nodes is controlled, using consensus for the transaction validation and all the necessary operation is still an option.
This access control reduces the number of nodes that can join the network but does not mean the scalability is not possible for the private network, it just means that even the scalability is controlled. Many organization has started to adopt this concept, to both uses the blockchain with all its power while still being in control of it.
Unfortunately, this central control limit reduces the security of the whole blockchain and increases the chances of a cyber-attack. Fewer nodes for the validation of the transactions mean more chances for data alteration of manipulation.
In addition, due to the central organization control, some data may or may not be shared with the different nodes, which means less or no transparency at all. This might be beneficial for some people as it enhances the privacy aspect of the different transactions.
This kind of blockchain is more suitable for countries or big organizations that want to create a local cryptocurrency. Here is a list of some of the most popular private Blockchain:
One of the most questions you may ask once you will learn about the private Blockchain is If the private Blockchain and central databases are both controlled by only one organization, then why would you switch from traditional databases to Blockchain? in simple words what is the difference between a private Blockchain and a central database?
There are two things that traditional central databases do not offer while Blockchain does:
In the traditional central databases, anyone in control of those data can modify them without being noticed by anyone. However, in the context of the Blockchain, any small change to the data can easily be noticed by the whole network and also rejected.
The digital signature capabilities that the blockchain system offer, give the users the ability to perform transactions between each other even if they don’t know or trust each other without the need for an intermediate.
With all the benefits offered by the public and the private Blockchains, those technologies still suffer from so many limitations that in some cases make them useless. Therefore, the Blockchain community started to think about an alternative solution to enhance both the already available Blockchains and future development.
As a result, two types of Blockchains have been introduced which are consortium Blockchain and hybrid Blockchains. In this part of this blog post, you are going to see what is a consortium Blockchain and when it can be used and why.
Consortium blockchains are another example of the permissioned blockchain managed by a group of organizations rather than one organization like in the private blockchain. The idea here is that a group of organizations can put in place a blockchain to perform different actions between them while having all the same rights and power on the network.
Moreover, by having multiple nodes that manage the blockchain, the security level of the blockchain gets enhanced and becomes difficult to make fraud or manipulate the data. You should know that even by having multiple nodes in the network, the consensus algorithm used in such a blockchain does not require much energy to work as some level of trust is already set at the access moment. The proof of voting consensus is a great example of how this type of blockchain operates in reality. Here is a good reference to learn more about this consensus. We will explain this type of consensus in the next blog posts.
This type of blockchain combines both the power of the private blockchain in terms of new node access control and the decentralization aspect of the blockchain concept. However, putting in place this concept might be very difficult as all the organizations need to have the same technology, budget, and skill to run the different parts of the blockchain, which is not always the case.
In addition, the transparency aspect of this type of blockchain is also very low compared to the public one. However, as I said this might be beneficial for the privacy of their users. Moreover, the scalability of this type of blockchain might be a difficult process as more partnerships with the same budget and technology need to be found to join the network.
This type of blockchain is more suitable for banks or supply chains or even research laboratories. Here is a list of some of the most popular consortium Blockchains:
Hybrid blockchain is a combination of a public and a private blockchain that work altogether. This means that only one organization is in control of the whole network but with a certain level of control and checks from the public blockchain. In addition, some kinds of transactions may require the public blockchain for validation.
Even if the hybrid blockchain is owned by a private organization, this one cannot make changes to the transaction. Moreover, transactions and information are kept secret, but they may be validated when necessary, such as when a smart contract allows access. Inside the network, private information is preserved yet is still verifiable.
By combining the two types of the blockchain (private and public) the hybrid blockchain, benefit from the scalability of the public blockchain and the transaction validation low fees and high speed. Moreover, the existence of both the public and the private blockchain enhances the security aspect of the system and makes it even immune against the famous 51% attacks (as black hat hackers will not have access to the network to perform the attack).
Even the transparency in this type of blockchain is kept even if the private blockchain exists, the only difference is that this transparency is also controlled.
This technology is more suitable for medical records or even the government as a voting system.
Here are some of the most popular hybrid blockchains:
As the different blockchain networks grow, the number of transactions created in each second gets higher and higher. This means that the time needed to validate a transaction gets higher too which increases the cost of performing those actions. Therefore, the blockchain network was facing a stage where scaling was required to solve those issues.
To scale a blockchain network you have two options:
In the first option, you will need to perform some optimization in the mainnet protocol. For example in the case of Ethereum, which is facing this problem too the main On-chain scaling technique they are focusing on is the Sharding. We will not go into detail on how this technique work but in a few words it is based on partitioning a database horizontally to disperse the load.
The second option is to opt for Off-chain scaling. This category has many techniques to implement and one of them is the Sidechains.
I really want to give you a realistic example to better see when the Sidechains can become an awesome technique to adopt. Let’s say a market app (where people buy and sell products) wants to adopt the blockchain as a way of payment. In the app itself, the users can perform so many transactions per minute to buy stocks. If the payments are directly performed in the for example Ethereum blockchain, the company would lose so much money in the gas fees. Moreover, as the gas fees are increasing on the Blockchain, this would have a huge impact on the app revenue.
Therefore, to solve this issue, the app could use a sidechain that can work just like the Etherium itself or use its own consensus algorithm for more optimization. By doing so, all the transactions would be managed at the level of the apps, and only once a day or so when everything is stable they can send this to the mainnet of Ethereum.
In other words, Imagine Sidechains like a small group where its members are connected to the big network but who trade more frequently with each other’s with their own rules to reduce the transaction fees.
In addition, I think the more relevant aspect of the sidechains is the fact that they work exactly as their mainnet. I mean if you have developed a Dapp for the mainnet of Ethereum, you can use the same code for the sidechains, it is just a matter of where you will deploy it.
Here is a list of some popular sidechain implementations:
Written by: Z. Oualid
I am a Cyber Security Expert, I have worked with many companies around the globe to secure their applications and their networks. I am certified OSCP and OSCE which are the most recognized and hard technical certifications in the industry of cybersecurity. I am also a Certifed Ethical hacker (CEH). I hope you enjoy my articles :).
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