What Is A Hybrid Blockchain?
It is important to understand what a
blockchain system is: a blockchain is a growing list of records,
called blocks, which are linked using cryptography.
Each block contains a cryptographic hash of the previous block a timestamp,
and transaction data (generally represented as a Merkle tree). By design,
a blockchain is resistant to modification of the data. It is “an open,
distributed ledger that can record transactions between two parties efficiently
and in a verifiable and permanent way.
Hybrid Blockchain
Hybrid
Blockchains could lie
somewhere in-between private and public blockchains, depending on their
architecture. Hence, to get a good understanding of hybrid blockchains, one
must first understand the differences between private and public blockchains.
As the name suggests, public blockchains are accessible to and managed by the
public. Anyone can participate in the upkeep and governance of the blockchain.
The most popular blockchain in the world, Bitcoin, is a public blockchain.
Participators are typically rewarded in the form of block rewards for their
contributions to the network to incentivise good behaviour on the part of
network peers. Since millions of users manage a public blockchain across the
world in real time, attaining consensus for a public blockchain is
time-consuming and expensive.
For example, the consensus
mechanism that Bitcoin uses, Proof of Work, relies profoundly on wasteful
computations for millions of devices to ensure security. By comparison, a
private blockchain allows limited access to entities outside a trusted few who
were involved in the creation of the private blockchain. Typically, private
blockchains have administrators who can control permissions of adding or
modifying data on a private blockchain. The most popular private blockchains
include the Hyperledger
fabric which is being developed as a competitor to Ethereum by IBM and
quorum, which is being developed by J.P. Morgan. Private blockchains are much
faster than public blockchains because the network is managed by a handful for
trusted nodes whose motives are clearly for the benefit of the network. Such
trusted nodes typically belong to financial institutions or universities to
maintain fairness and remain unbiased.
Now, it is clear that each type of blockchain has its strengths and
weaknesses. Public blockchains while being transparent and resistant to
tampering are slow and expensive whereas, private blockchains are somewhat
centralised but can deliver much higher throughput and speeds. As a logical
step, hybrid blockchains combine the benefits of both of the blockchains while
trying to limit the disadvantages. Therefore, with hybrid blockchains, we can
employ a public blockchain to make the ledger accessible to every single person
in the world, with a private blockchain running in the background that can
control access to the modifications in the ledger.
Hybrid Blockchains in the Real World
One of the leading hybrid
blockchain platforms, XinFin,
has developed a unique network for Ramco Systems for the management of supply
chain logistics. XinFin completed its ICO earlier this year and had since
developed its public-private blockchain on Ethereum (public blockchain) and
Quorum (private blockchain). There are numerous benefits to using a hybrid
blockchain like the speed of private blockchains combined with the security of
public blockchains. The private blockchain is used to generate a hash of
transactions which is later verified using the public blockchain.
Another real-world application of hybrid blockchains includes Ripple network and the XRP token. Ripple has
regularly been criticised for its centralised nodes which can arbitrate
transactions in the case of a dispute. But by adding a public blockchain to
verify the operations of its private blockchain can make the network much more
secure for its users.
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