Public blockchains are being utilized to develop more efficient systems for logistics, finance, and governance.
Private blockchains offer individuals the ability to store their wealth outside of government and hacker control.
The strength of blockchains lies in their ability to resist tampering and provide transparent access to data for all users. Nonetheless, there are certain applications that cannot be addressed by solely public or private blockchains. This is where hybrid blockchains come in, as they offer a solution to everyday problems.
What Is a Hybrid Blockchain?
To put it simply, a hybrid blockchain is a combination of the benefits of public and private blockchains. Its architecture is customizable and can be designed based on the specific requirements of the application. In a hybrid blockchain, some aspects are public, while others are private, providing transparency and security for all users.
The public aspect of a hybrid blockchain operates similarly to a public blockchain, with anyone able to participate, and transactions are verified and recorded by a network of validators. The private aspect of a hybrid blockchain offers additional security and privacy, with only authorized parties able to access it, and transactions validated by a specific set of validators. This provides businesses with greater control over their data and enhances the security of sensitive information.
The architecture of a hybrid blockchain is customizable, allowing members to determine who can participate in the blockchain and which transactions are made public. This enables companies to work with stakeholders in the most effective way possible.
Even though a private entity may own a hybrid blockchain, they cannot alter transactions. Hybrid blockchains enable organizations to establish a private, permission-based system alongside a public, permissionless system, enabling them to administer access to specific data stored in the blockchain and decide which data will be public.
Hybrid blockchains have wide-ranging applications in various industries, including finance, healthcare, supply chain management, and more. In the finance industry, a hybrid blockchain can offer a secure and transparent platform for trading cryptocurrencies while ensuring that confidential information remains private.
Benefits of Hybrid Blockchain
After gaining a clear understanding of what hybrid blockchains are, it's time to discuss the benefits of using hybrid blockchain technology.
Closed Ecosystem: The most significant advantage of hybrid blockchain is its ability to work in a closed ecosystem. This means that companies or organizations can take advantage of blockchain technology without worrying about their information being leaked.
Flexibility: Hybrid blockchain technology is flexible and allows for changes to be made as needed. Companies can modify the rules based on their needs, depending on what the hybrid blockchain is designed to do. However, it's important to note that data cannot be changed or transactions modified in hybrid systems that handle band registry or user identity for verification purposes.
Security: Hybrid blockchain is immune to a 51% attack, which is a common attack on public blockchains. This means that hackers cannot gain access to the network to carry out an attack.
Privacy: While private blockchains are better suited for privacy-related issues, they are limited when it comes to communicating with the outer world. Hybrid blockchains offer the ability to protect privacy while still communicating with all stakeholders, including the public.
Low Transaction Cost: Hybrid blockchain technology offers the added benefit of low transaction costs. Transactions are cheap, as they require few nodes to verify them. The most powerful nodes in the network make it easy to verify transactions, which may take thousands of nodes in the public blockchain. As a result, transaction fees can be reduced to as low as $0.01 per transaction.
Hybrid Blockchain Use Cases
Hybrid blockchains have a wide range of potential use cases due to their unique combination of features. They offer the transparency of public blockchains while also providing the privacy and control of private blockchains. This makes them ideal for a variety of applications in different industries.
Finance - One of the most promising areas for hybrid blockchain technology is in finance. Hybrid blockchains offer a secure and transparent platform for trading securities, while also ensuring that confidential information remains private. They can be used to facilitate cross-border transactions, reduce fraud and increase the efficiency of settlements. Hybrid blockchains can also be used to create smart contracts that automate many financial processes, such as loan origination, underwriting and claims management.
Supply Chain Management - Supply chain management is another area where hybrid blockchains can be used effectively. Hybrid blockchains can provide an immutable record of goods as they move through the supply chain, ensuring transparency and reducing the risk of fraud. They can be used to track products from the source to the consumer, ensuring that products are genuine and that they meet regulatory standards. Hybrid blockchains can also be used to automate supply chain processes, such as procurement, inventory management and logistics.
Healthcare - The healthcare industry can also benefit from the use of hybrid blockchains. They can be used to securely store and share patient information, ensuring that sensitive information is kept private while still allowing healthcare providers to access the information they need. Hybrid blockchains can also be used to track the movement of drugs and medical equipment through the supply chain, reducing the risk of counterfeit products and ensuring that products meet regulatory standards.
Identity Verification - Hybrid blockchains can also be used for identity verification. They can be used to store and verify identity information, such as government-issued IDs, passports, and driving licenses. This can be especially useful for remote verification, such as when opening a bank account or applying for a loan. Hybrid blockchains can also be used for secure voting systems, ensuring that votes are counted accurately and that the results are transparent.
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