What are Layer 2 and Side Chains? 6 Main Types of Blockchain
Public awareness of blockchain technology is also increasing in Hong Kong recently. But do you know that there are different types of blockchains in the world?
As the trading of cryptocurrencies has been legalized in Hong Kong, exchanges are scrambling to apply for the required licenses. Public awareness of blockchain technology is also increasing. But do you know that there are actually various different types of blockchains in the world? This article will explore 6 types of blockchains, as well as some representative projects.
Public Chains
Imagine a giant ledger that everyone can participate in, where every transaction is transparent and cannot be tampered with. This is the essence of public blockchains!
Public chain technology originated with the birth of Bitcoin in 2009. Its decentralization and security features have attracted global attention. The introduction of smart contracts in Ethereum in 2015 further expanded the scope of blockchain applications.
Notable projects:
- Bitcoin: The ancestor of cryptocurrencies, it was first born in 2009 and can be used as a global payment and transfer tool, and is maintained by a large network of miners.
- Ethereum: In addition to being a digital currency platform, it also supports the deployment and operation of smart contracts, making decentralized applications (dApps) and non-fungible tokens (NFTs) possible.
Layer 2 Blockchains
Although public chains are secure and transparent, their transaction speed is often slow and their transaction fees are high. Layer 2 chains are like highways built on top of the main chain, designed to solve these bottlenecks. For example, the Lightning Network for Bitcoin and the Arbitrum One Network for Ethereum can quickly process a large number of transactions while maintaining security guarantees with the main chain.
As early as 2015, when the transaction speed and fees of the Ethereum main chain began to emerge, the concept of layer 2 chains also came into being.
Notable projects:
- Polygon Network: Formerly known as Matic Network, it was founded in 2017 by a team from India with the goal of solving the transaction speed and fee problems of the Ethereum main chain. It uses Plasma sidechain technology to process transaction data in segments, significantly improving transaction speed and throughput.
- Lightning Network: A payment network built on top of Bitcoin, designed to solve the problems of slow and expensive Bitcoin transactions. Its concept was first proposed by Joseph Poon and Thaddeus Dryja in 2015, and development began in 2016.
Side Chains
Sidechains emerged around 2014, like independent roads that run parallel to the main chain, with their own consensus mechanisms and governance rules. They can exchange data and assets with the main chain in a two-way manner. This design makes sidechains more flexible than the main chain, making them easier to customize and develop, and suitable for specific application scenarios.
Notable projects:
- Rootstock: One of Ethereum's sidechains, used to quickly and securely process Bitcoin transactions.
- Liquid: Another Ethereum sidechain, designed specifically for cross-asset transactions and financial applications.
Private Chains
Like a secluded private estate, only invited members can participate. Enterprises and organizations can deploy and manage private chains themselves to improve data security and controllability, and they are suitable for use in supply chain management, healthcare, and other areas that require confidentiality. The development of private chains is related to the growing interest of enterprises in blockchain technology. Major technology companies and financial institutions are actively exploring the application of private chains.
Notable projects:
- Hyperledger Fabric: An open-source private chain project led by the Linux Foundation, widely adopted by well-known companies such as IBM and JPMorgan.
Consortium Chains
Between public chains and private chains, they are operated by a group of pre-selected organizations, ensuring a certain degree of transparency while meeting the needs of specific groups. The concept of consortium chains emerged around 2015 and is applicable to scenarios that require collaboration but also require a certain degree of control.
Notable projects:
- BSN (Blockchain Service Network): A consortium chain network led by China, designed to promote the application of blockchain in different industries.
Application-Specific Blockchains
Also known as dedicated blockchains, they are designed for specific applications or industries. They typically have higher performance, security, and customization than other types of blockchains.
Notable projects:
- VeChain: A blockchain platform focused on supply chain management, adopted by many well-known companies.
- Corda: Another popular application-specific blockchain platform, designed for applications in the financial and insurance industries.
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