You’ve probably encountered a crypto network when transferring coins or tokens from an exchange to a wallet. For instance, the Bitcoin, Ethereum, BNB Smart Chain, Polygon, or TRON networks.
These crypto networks are crucial because choosing the wrong one when making a transaction may cause you to permanently lose your funds. But that’s not all. There’s so much more to unpack about these networks—like different blockchain types and their use cases—and that’s what we’re all about in this article.
First, What Is a Crypto Network?
Crypto networks, also called blockchain networks, are infrastructures that govern the transfer of your crypto assets. At the same time, they enable apps to access ledger and smart contract services. These services make crypto transactions smoother, faster, and more reliable by cutting out the need for intermediaries and automating the process based on logic and pre-set conditions.
Why Are Crypto Networks Important?
Before blockchains, people had to rely on banks or other financial institutions to make sure transactions were valid and secure. But with blockchain, it's different. Every time someone sends or receives crypto, all the computers in the network work together to confirm that the transaction is legit. Once confirmed, it's added to the chain, and everyone can see it. This transparency and security make it extremely hard for anyone to screw over the system.
What Are the Different Types of Crypto Networks?
Here are the four main types of blockchain networks:
1. Public Blockchain Network
A public network, as its name suggests, is open to the public. Anyone with internet access can join, conduct or verify transactions, or participate in the core activities of this type of network. It’s decentralised, and thus there are no intermediaries involved in the process.
The public network’s transparency, along with the huge number of participants in the blockchain, keeps it secure against hacking attempts, data breaches, and other cybersecurity issues. They usually operate on an incentivising system, such as the mining process. Some popular examples of this network type include the Bitcoin, Ethereum, BNB Smart Chain, and Litecoin networks.
2. Private Blockchain Network
A private blockchain operates in a limited environment, like a closed network. You can only join the network if you’re invited, and your identity and other necessary information will be checked and verified. The people who run the network, also called network operators, manage who can and can’t access what’s in the network and are the ones who verify everything.
Private networks are especially useful for companies that want to use blockchain technology for their specific needs. Also, only specific users may have access to transaction records.
One popular private blockchain provider in the market is IBM.
3. Hybrid Blockchain
A hybrid blockchain offers the advantages of both public and private blockchains while mitigating potential drawbacks. They usually employ a two-pronged approach, involving private nodes operated by permissioned parties and a parallel set of public nodes. Transactions and records within a hybrid blockchain generally remain private, but they can also be validated when necessary, such as through access granted by a smart contract.
Ideally, a well-structured hybrid blockchain, similar to various public blockchains, would demonstrate resilience against hacking attempts and cyberattacks. And much like private blockchains, hybrid variants come with minimal to no transaction fees. They may lean towards full centralisation, with one or a couple of entities holding comprehensive control, or they may tend towards a semi-decentralised nature, allowing more entities to share control.
4. Consortium Blockchain
Also known as the federated blockchain, a consortium blockchain is quite similar to a hybrid blockchain. However, the main difference is that a hybrid blockchain combines the features of public and private blockchains, while a consortium blockchain is a collaboration between different organisations to create and manage a shared blockchain.
The consortium blockchain maintains a decentralised quality despite being private and permissioned because they are usually managed by several organisations. Therefore, there isn't a single central authority controlling the entire process. With this network type, certain aspects of the organisation's operations can be shared publicly, while some others can remain confidential.
The Bottom Line
Different crypto networks fall into different categories—each with specific features and use cases. Being familiar with these crypto networks and what sets each type apart can help you navigate the crypto realm, make informed decisions about what projects to get involved in, and how to keep your transactions secure.
What are permissioned and permissionless networks?
Blockchain networks can be classified into two: permissioned and permissionless.
Permissioned blockchains are blockchains where access and participation are controlled. You need permission or approval to join and take part in the network’s activities. On the other hand, permissionless blockchains are open to anyone. There's no need for special permission to join or use the blockchain. It's like a public park where anyone can come and play.
The key difference is that permissioned blockchains have restrictions on who can participate, while permissionless blockchains are accessible to everyone.
What are the different types of networks in crypto?
As discussed above, the main types of blockchain networks are public, private, hybrid, and consortium.
Which crypto network should I use?
The answer to this question depends on your specific goals, requirements, and preferences. Some factors you can consider when choosing a crypto network include the privacy of your transactions, the accessibility of the network to certain participants, your project’s scalability needs, and the blockchain-related regulations in your region, among others.
What is an example of a crypto network?
Some examples of crypto networks are the Bitcoin network, Ethereum, Ripple, BNB Smart Chain, Polygon, and TRON.