A hybrid blockchain is a type of blockchain that combines the features of a public and private blockchain. Hybrid blockchains integrate the openness of a public blockchain with the controlled access of a private one so that users can take the best from both rulesets.
Table of Contents
How does hybrid blockchain work?
There are two types of blockchain in hybrid: public and private, so combining these makes it a hybrid blockchain. Let’s understand.
Two-Tiered Structure
Public and Private Layers: A hybrid blockchain has a public and a private part. The public layer can be used for transactions and data that need to be seen and the private layer excludes only selected authorized participants.
So, this dual-layer setup enables organizations to have control over sensitive information at the same time it takes advantage of the public chain for verifiable data.
Access Controls
Permissioned Access: Since the private section of the blockchain is usually accessed only by verified users, in most cases we speak of a permissioned framework, where only authorized nodes can validate transactions or get access to certain data.
Smart Contracts for Access: To control access, smart contracts are used to limit what can be seen, validated, or participated in by certain people. This structure can only share Security and data on a need-to-know basis.
Consensus Mechanism
Depending on requirements Hybrid blockchains use different consensus mechanisms (e.g. Proof of Stake, Practical Byzantine Fault Tolerance).
There might be a more decentralized validation and security in the public part and an efficiency in the private part by using a faster more centralized mechanism.
As with any blockchain, hybrid blockchains can have different forms, using multiple consensus algorithms for different functions of the network, or other improvements to performance and trust.
Transparency depends on the privacy setting
A hybrid blockchain is a public blockchain. For example, certain transactions or pieces of data, to be transparent and auditable. The use of this is beneficial if it is required for compliance or if a stakeholder needs access to specific information.
Private Transactions: In the restricted network layer sensitive data is private and accessible only to authorized participants, while transactions themselves remain so, within the limited network layer.
Interoperability
Hybrid blockchains can have hybrid blockchain defined as an extension of your current blockchain that allows it to interact with other blockchains (public, private, or another hybrid) if the scenario similarly requires.
It enables companies to securely transfer data from other blockchain systems or any other network.
Security and Immutability Data Integrity:
Similar to Public blockchains hybrid blockchains security has features such as cryptographic, hashing, and immutability. It means records, even public ones, can’t be altered once they’re added to the blockchain.
Private Control with Public Validation:
A hybrid blockchain keeps a few nodes or data private, while protecting data and yet uses the rest of the broader, decentralized security of a public network for some aspects.
Some of the key characteristics and benefits are presented
Controlled Access and Privacy
A hybrid blockchain divides the blockchain into some that are public and some that are restricted. What this means is that participants have some degree of control over which users can see or are allowed to do a particular transaction.
For cases where the business still needs to make some data/flow publicly auditable, but in a private setup this is the ideal setup.
Flexibility and Scalability
By granting flexible access and permissions, hybrid blockchains can adjust to changing needs resulting in greater adaptability to different applications. The network is no longer dependent on widespread public participation for all transactions nor does it need to be scalable.
Cost Efficiency
Hybrid blockchains are better because not all transactions have to go through the public chain, using fewer resources than the public chain.
Security
Unlike a private blockchain, which is only accessible to its clients, hybrid blockchains have some security features inherited from public blockchains such as decentralization, and immutability, but at the same time, they enjoy the tighter access control that private blockchains have.
Hybrid Blockchain Use Cases
· Supply Chain Management: This enables companies to keep internal processes confidential, but gives customers a way to verify the origins and authenticity of their products.
· Government and Public Records: Sensitive information can be kept on private records by governments, and then made records or processes open to public inspection.
· Finance and Banking: With public oversight where it’s required to meet regulatory requirements, hybrid blockchains allow for secure, private transactions between institutions.
Examples of hybrid blockchains
Dragonchain
Dragonchain was originally developed by Disney hybrid blockchain platform that helps businesses keep their data private while tying into public blockchains such as Ethereum or Bitcoin.
It enables controlled access to sensitive data and has the flexibility to make some parts of the blockchain publicly auditable.
XinFin (XDC Network)
XinFin is a specifically hybrid blockchain dedicated to global trade and finance. It brings together private and public platform components for conducting confidential transactions within companies while presenting a public ledger for audit and compliance purposes. Well-known is its fast transactions, low fee, dual enterprise, and financial use cases integration.
Ripple (XRPL in some aspects)
Ripple’s XRP Ledger is a hybrid choice, basically utilizing private, permissioned join the operation with banks and other financial institutions while still being open.
Its consensus mechanism combines the transparency of public blockchains with banks’ and financial institutions’ security and privacy controls.
IBM Food Trust
The IBM Food Trust uses a hybrid model of transparency for the food supply chain. It allows producers, suppliers, retailers, and consumers to confirm the provenance of food products and those to handle while avoiding disclosure of sensitive business information.
By using the blockchain, records are protected but specific participants can access them while maintaining visibility of the entire supply chain.
Hedera Hashgraph
Hedera Hashgraph technically isn’t a blockchain, but it is a public ledger that allows organizations to create private applications or parts of a ledger that interface with the public system.
By introducing public privacy (like a public blockchain) in combination with permissioned access for private transactions (like a purely permissioned blockchain), Hedera’s model resembles hybrid blockchain applications.
Conclusion
In simple terms, the hybrid blockchain is an arrangement that is changeable and is made up of both the public and private blockchain benefits.
This provides a level of privacy and scalability, while offering the possibility of public transparency, and is great for industries that need this in the form of control and visibility such as finance, supply chain, and healthcare.