Do you want to know about the different types of blockchain? If you do, then you have come to the right place.
There is no doubt that blockchain has evolved a lot in the last decade. It started with bitcoin, which offered public blockchain — the first type of blockchain. We can also term bitcoin’s blockchain as the first generation of blockchain technology.
Right now, we are at a point where there are different types of blockchain technology – each one of them serves their purpose and solves a particular or a set of problems.
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Also, check out Blockchain For Beginners: Getting Started Guide
Why Is There A Need for Different Types Of Blockchain?
Before we do an actual discussion of blockchain types, let’s learn why we need them in the first place.
When the blockchain technology was introduced to the world, it was a public blockchain type with cryptocurrency use-case. It is really hard to understand the intent of its creator, but in general, it provided the concept of decentralized ledger technology (DLT).
The DLT concept changed how we solve things around us. It gave organizations the ability to work without depending on a centralized entity.
Distributed technology solves the drawbacks of the centralization, but in itself brought a lot of other problems to solve when it comes to applying blockchain technology to different scenarios.
For instance, bitcoin used an inefficient consensus algorithm, Proof-of-Work. It required the nodes to solve mathematical calculations using energy.
Initially, it was not a problem, but as soon as the difficulty increased, the time and energy required to solve those mathematical equations also increased. This inefficiency makes it not suitable for any system that needs to stay efficient no matter what.
For example, banks deal with a lot of transactions every day. So, this blockchain type is just not suitable for it.
There were other problems associated with the first generation of blockchain, including scalability, no automation, and so on.
A Different Viewpoint
Now, let’s take a different outlook on the problem. Not everyone, including organizations, can use a public blockchain. This is because they cannot make every aspect of their business public. They do have some critical data that makes their business successful. If it gets public, then there will be competitors using it.
To solve the said use-cases, private or federated blockchain came into existence. Private blockchains offer a completely private environment where the organization decides who participates in it. This allows them to take advantage of blockchain features without the need to make everything public.
To summarize, we have the following –
- The first-generation blockchain had multiple drawbacks, including efficiency and scalability.
- Also, it is a public blockchain which doesn’t suit everyone’s agenda or need.
These two reasons can be seen as the cornerstone of advancement in the different types of blockchain technology.
Different Types of Blockchain Technology
Now that we have established a good understanding of the need for blockchain technology types. It is now time for us to learn about them.
At a glance, there are four major different types of blockchain types. They include the following.
A public blockchain is the permission-less distributed ledger technology where anyone can join and do transactions. It is a non-restrictive version where each peer has a copy of the ledger. This also means that anyone can access public blockchain if they have an internet connection.
One of the first public blockchains that were released to the public was the bitcoin public blockchain. It enabled anyone connected to the internet to do transactions in a decentralized manner.
The verification of the transactions is done through consensus methods such as Proof-of-Work(PoW), Proof-of-Stake(PoS), and so on. At the cores, the participating nodes require to do the heavy-lifting, including validating transactions to make the public blockchain work. If a public blockchain doesn’t have the required peers participating in solving transactions, then it will become non-functional.
Examples of public blockchain: Bitcoin, Ethereum, Litecoin, NEO
Public blockchains are good at what they do. Its advantages include the following.
- Anyone can join the public blockchain.
- It brings trust among the whole community of users
- Everyone feels incentivized to work towards the betterment of the public network
- Public blockchain requires no intermediaries to work.
- Public blockchains are also secure depending on the number of participating nodes
- It brings transparency to the whole network as the available data is available for verification purposes.
Public blockchain does suffer from disadvantages. They are as follows:
- They suffer from a lack of transaction speed. It can take a few minutes to hours before a transaction is completed. For instance, bitcoin can only manage seven transactions per second compared to 24,000 transactions per second done by VISA. This is because it takes time to solve the mathematical problems and then complete the transaction.
- Another problem with public blockchain is scalability. They simply cannot scale due to how they work. The more nodes join, the more clumsy and slow the network becomes. There are steps taken to solve the problem. Bitcoin, for example, is working on lighting the network, which takes transactions off-chain to make the main bitcoin network faster and more scalable.
- The last disadvantage of a public blockchain is the consensus method choice. Bitcoin, for example, uses Proof-of-Work(PoW), which consumes a lot of energy. However, this has been partially solved by using more efficient algorithms such as Proof-of-Stake(PoS).
There are multiple use-cases of the public blockchain. To get a better idea, let’s list some of them below.
- Voting → Governments can do voting through public blockchain employing transparency and trust.
- Fundraising → Companies or initiatives can make use of the public blockchain for improving transparency and trust.
We hope you understood public blockchain, one of the different types of blockchain technology.
A private blockchain can be best defined as the blockchain that works in a restrictive environment, i.e., closed network. It is also a permissioned blockchain that is under the control of an entity.
Private blockchains are amazing for using at a privately-held company or organization that wants to use it for internal use-cases. By doing so, you can use the blockchain effectively and allow only selected participants to access the blockchain network. The organization can also set different parameters to the network, including accessibility, authorization, and so on!
So, how is it different from a public blockchain? It is different in the way it is accessed. Otherwise, it offers the same set of features as that of the public blockchain, providing transparency, trust, and security to the selected participants.
Another major difference is that it’s kind of centralized as only one authority looks over the network. So, it doesn’t have a decentralized theoretical nature.
Examples of Private blockchain: Multichain, Hyperledger Fabric, Hyperledger Sawtooth, Corda
- Private blockchains are fast. This is because there are few participants compared to the public blockchain. In short, it takes less time for the network to reach consensus resulting in faster transactions.
- Private blockchains are more scalable. The scalability is possible because, in a private blockchain, only a few nodes are authorized to validate transactions. This means it doesn’t matter if the network grows, the private blockchain will work at its previous speed and efficiency. The key here is the centralization aspect of decision making.
- Private blockchains are not truly decentralized. This is one of the biggest disadvantages of private blockchain and goes against the core philosophy of distributed ledger technology or blockchain in general.
- Achieving trust within private blockchain is tough because the centralized nodes make the last call.
- Lastly, as there are only a few nodes here, the security isn’t all that good. It is important to understand that it is possible to lose security if a certain amount of nodes go rogue and compromise the consensus method utilized by the private network.
There are multiple private blockchain’s use-cases. Some of them are listed below.
- Supply chain management → Organizations can deploy a private blockchain to manage their supply chain.
- Asset ownership → Assets can be tracked and verified using a private blockchain.
- Internal Voting → Private blockchain is also effective at internal voting.
Also read, 12+ Practical Blockchain Use-Cases 2020
We hope you understood private blockchain, one of the different types of blockchain technology.
A consortium blockchain(also known as Federated blockchains) is a creative approach to solving the needs of organizations where there is a need for both public and private blockchain features. In a consortium blockchain, some aspects of the organizations are made public, while others remain private.
The consensus procedures in a consortium blockchain are controlled by the preset nodes. More so, even though it’s not open to mass people, it still holds the decentralized nature. How? Well, a consortium blockchain is managed by more than one organization. So, there is no one single force of centralized outcome here.
To ensure proper functionality, the consortium has a validator node that can do two functions, validate transactions, and also initiate or receive transactions. In comparison, the member node can receive or initiate transactions.
In short, it offers all the features of a private blockchain, including transparency, privacy, and efficiency, without one party having a consolidating power.
Examples of Consortium Blockchain: Marco Polo, Energy Web Foundation, IBM Food Trust.
- It offers better customizability and control over resources.
- Consortium blockchains are more secure and have better scalability.
- It is also more efficient compared to public blockchain networks.
- Works with well-defined governance structures.
- It offers access controls.
- Even though it is secure, the whole network can be compromised due to the member’s integrity.
- It is less transparent.
- Regulations and censorship can have a huge impact on network functionality.
- It is also less anonymous compared to other types of blockchain.
There are multiple use-cases of consortium blockchain. Some of them include the following
- Banking and payments: A group of banks can work together and create a consortium. They can decide the nodes that will validate transactions.
- Research: A consortium blockchain can be used to share research data and results.
- Food tracking: It is also great for food tracking.
Check out our other guide – Blockchain Usage: List of 20+ Blockchain Technology Use Cases now!
We hope you understood consortium blockchain, one of the different types of blockchain technology.
Hybrid blockchain is the last type of blockchain that we are going to discuss here. More so, hybrid blockchain might sound like a consortium blockchain, but it is not. However, there can be some similarities between them.
Hybrid blockchain is best defined as a combination of a private and public blockchain. It does have use-cases in an organization that neither wants to deploy a private blockchain and nor public blockchain and simply wants to deploy the best of both worlds.
Example of Hybrid Blockchain: Dragonchain, XinFin’s Hybrid blockchain
- Works in a closed ecosystem without the need to make everything public.
- Rules can be changed according to the needs.
- Hybrid networks are also immune to 51% attacks.
- It offers privacy while still connected with a public network.
- It offers good scalability compared to the public network.
- Not completely transparent.
- Upgrading to the hybrid blockchain can be a challenge.
- There is no incentive for participating and contributing to the network.
Some of the best use-cases of the Hybrid blockchain are as follows:
- Real estate: You can use hybrid networks for real-estate purposes where real-estate companies can use it to run their systems and also use the public aspect for showing information to the public.
- Retail: Retail can also use the hybrid network to streamline their processes.
- Highly regulated markets: Hybrid blockchains are also ideal for highly regulated markets such as financial markets.
Don’t forget to check out our guide on Real-World Blockchain Use Cases – 46 Blockchain Applications
We hope you understood hybrid blockchain, one of the different types of blockchain technology.
Which Blockchain Type Should You Choose?
Each blockchain has something unique to offer. That’s why there is not a simple answer to what type of blockchain you should choose.
However, to make sure that you make the right choice, let’s go through each one of them and understand what they have to offer.
Public Blockchain Network
As you already know, anyone can join public blockchains, and the information is available to everyone as well. This makes them ideal for organizations that thrive on trust and transparency. This means that NGOs or social support groups can make the most out of the public-based blockchain.
Its public nature also means that it cannot be used for businesses in the private sector. The reason behind it is that they need to keep their data private. Also, public blockchains can be expensive to manage as it requires nodes to act as a miner and run either Proof-of-Work(PoW) and Proof-of-Stack(PoS).
So, if you are a person who wants to introduce a new global cryptocurrency, then this might be for you! Jokes apart, if you want everything public, then it is wise to create a public blockchain network.
Private Blockchain Network
The private blockchain is the opposite of the public blockchain as it offers a private network. It is best for businesses that want a private network but wants to get the benefits of blockchain. They are also centralized in nature, which means that a company can control the network without keeping it open for the public.
They offer all the key features of blockchain and give members of the company a way to build trust through immutability and security.
In private networks, the company can also set rules and manage the network according to their requirements.
Consortium Blockchain Network
Next, we have a consortium blockchain network that is controlled by a set of organizations or nodes rather than a centralized node or a decentralized network. A consortium blockchain is good because it comes with pre-selected nodes.
It is ideal for a solution that requires collaboration across the board. For instance, supply chain, food, medicine — all of these would require collaboration across brands.
Hybrid Blockchain Network
Finally, we have the last blockchain technology types – Hybrid blockchain. If you are looking for a way to get all the advantages of both private and public blockchain with minimal disadvantage, then you should go for this blockchain.
In reality, hybrid blockchain does come with disadvantages like other blockchain technology types. However, they are quite minimal.
It seems that hybrid blockchains may just be perfect for a lot of upcoming business models. So, choose well.
This leads us to the end of our different types of blockchain guide. In general, it is a good idea to use private blockchain if you are a company and want to use it without making everything public.
We hope that you understand these blockchain technology types. So, what do you think about them? Comment below and let us know.