There are four primary types of blockchain network types: Public, Private, Hybrid, and Consortium blockchains. In this article we will explain their advantages, disadvantages, and applications. Blockchain technology has revolutionized various industries by providing a decentralized, transparent, and secure method of recording transactions and sharing data. It is not a singular monolithic structure but comes in different types, each with its unique advantages and use cases.
What are the 4 different blockchain types?
The blockchain universe is diverse, with numerous types of blockchain networks suited for different applications. Here are the four primary types:
- Public Blockchain: A decentralized and open blockchain where anyone can participate.
- Private Blockchain: A permissioned blockchain with a centralized network.
- Hybrid Blockchain: An interoperable blockchain that combines aspects of both public and private blockchains.
- Consortium Blockchain: A federated blockchain governed by multiple organizations.
Each of these types is suited for specific use cases, as we shall see in the following sections.
What is Public Blockchain?
A public or open blockchain is a decentralized network where anyone can join and participate without needing permission. It is transparent, accessible, and secure, embodying the original vision of blockchain technology.
How does Public Blockchain work?
In a public blockchain, transactions are validated by the community through a process known as mining, following a consensus mechanism like Proof of Work (PoW) or Proof of Stake (PoS). Once validated, transactions are added to a block, which is then added to the blockchain.
Advantages Of Public Blockchain
- Decentralization: No single entity has control, leading to increased transparency and fairness.
- Security: Public blockchains are secure due to their decentralized nature and cryptographic security measures.
- Accessibility: Anyone, anywhere, can join, make transactions, or validate transactions on a public blockchain.
Disadvantages of Public Blockchain
- Scalability: Public blockchains often struggle with scalability issues due to their design.
- Privacy: As all transactions are transparent, there is little privacy in public blockchains.
- Efficiency: The process of consensus can be slow and consume significant energy.
Use Cases of Public Blockchain
One of the most widely known public blockchain examples is Bitcoin. Bitcoin introduced the concept of a decentralized currency, where transactions are confirmed by a network of miners and recorded on a public ledger. This public ledger is a blockchain network, open to anyone in the world. Here, we see the fundamentals of a public blockchain at work: anyone can participate in validating transactions on the blockchain and anyone can audit the transactions.
Another notable example of public blockchains is Ethereum. Ethereum extends the concept of decentralization by enabling developers to write smart contracts and create decentralized applications (DApps) that run on the blockchain network.
Public blockchains, due to their transparent nature, have seen diverse use-cases. The advent of crypto networks like DeFi (Decentralized Finance) has made financial services accessible to people worldwide without intermediaries. These are just two examples from the list of blockchain platforms available in the public domain.
What is a Private Blockchain?
A private or permissioned blockchain is a centralized network where participants must be authorized to join. It provides more privacy than a public blockchain but at the expense of decentralization.
How does Private Blockchain Work?
In a private blockchain, a single organization or entity manages the network. Only authorized members can validate transactions, which are then added to the blockchain.
Advantages Of Private Blockchain
- Efficiency: Private blockchains are faster and more efficient as they don’t require mining or a complicated consensus mechanism.
- Privacy: Transactions are private, visible only to network members.
- Scalability: As fewer nodes participate in transaction validation, private blockchains are more scalable.
Disadvantages of Private Blockchain
- Centralization: A single entity has control over the network, which could lead to abuse of power.
- Accessibility: The need for permission can limit accessibility and innovation.
Use Cases of Private Blockchain
When it comes to a private blockchain example, the IBM Food Trust stands out. This is a blockchain-powered platform that allows various entities in the food industry to track and share information about food items, enhancing transparency and traceability. Here, a private blockchain platform is employed to provide controlled access and keep sensitive data confidential.
Another private blockchain example would be the Corda blockchain, developed by the consortium R3. Corda is used widely in the financial industry, where privacy and efficiency are critical. This platform showcases the private vs public blockchain comparison effectively, highlighting the increased speed and privacy offered by private blockchains.
Public vs Private Blockchain
| Blockchain Type | Decentralization | Privacy | Efficiency | Scalability | Accessibility |
| Public | High | Low | Low | Low | High |
| Private | Low | High | High | High | Low |
What is Hybrid Blockchain?
Hybrid blockchain is a type of network that integrates the features of both public and private blockchains. This innovative blend offers a flexible and customizable solution, providing the transparency and inclusivity of public blockchains while maintaining the security and control inherent in private blockchains. It ensures that organizations can control who accesses the information, yet allows for certain data to be made public, creating a perfect balance between transparency, security, and control. Dragonchain is a notable example of a hybrid blockchain.
Advantages of Hybrid Blockchain
- Flexibility: Hybrid blockchains can operate both publicly and privately, providing greater flexibility.
- Security: Transactions are secure as they occur within a permissioned network.
- Interoperability: These blockchains can interact with multiple other blockchains.
Disadvantages of Hybrid Blockchain
- Complexity: The dual nature of hybrid blockchains can lead to complexity.
- Implementation challenges: They may face challenges in adoption due to regulatory and technical issues.
Use Cases of Hybrid Blockchain
Dragonchain, a U.S.-based blockchain technology company, presents a notable example of a hybrid blockchain. It allows businesses to keep sensitive business logic and data private, while also interfacing with multiple blockchain networks like Ethereum, ETC, and Bitcoin. This means businesses can execute sensitive functions on a private, permissioned network, but also interlink with public networks for broader transparency.
Another hybrid blockchain example is XinFin Network’s XDC protocol, which offers hybrid relay bridges, instant block finality, and interoperability with ISO20022 financial messaging standards. It highlights the flexibility and versatility that hybrid blockchains provide.
What is Consortium Blockchain?
Consortium blockchains are semi-private networks controlled by a group of nodes or organizations, rather than a single entity, offering a balance between the transparency of public blockchains and the security of private blockchains.
Advantages Of Consortium Blockchain
- Collaboration: Multiple organizations can collaborate effectively.
- Control and Privacy: While not fully decentralized, the control is still distributed among multiple entities.
- Efficiency: Transaction validation is quicker compared to public blockchains.
Disadvantages Of Consortium Blockchain
- Less decentralization: Consortium blockchains are less decentralized than public blockchains.
- Limited public participation: The general public can’t participate in the consensus process.
Use Cases of Consortium Blockchain
A consortium blockchain, also known as a federated blockchain, is employed effectively by the interbank platform we. trade. Owned by a group of large banks, including HSBC, Santander, and Societe Generale, we. trade uses blockchain to enhance the speed, safety, and efficiency of financial transactions between businesses.
Another significant example is the energy consortium EWF (Energy Web Foundation), which uses a consortium blockchain to create a standard core blockchain platform specifically for the energy sector.
In conclusion, there are four types of blockchain networks in use today – public, private, hybrid, and consortium. Each of these types of blockchains serves different use cases based on their unique advantages. The diverse list of all blockchains being used across sectors underlines the versatile potential of blockchain technology. The optimal choice between private vs public blockchain (or a hybrid or consortium) depends on the specific needs of the application. The primary consideration should be around factors like decentralization, transparency, privacy, control, and speed. The landscape of blockchain technology platforms continues to evolve, and we can expect to see more innovations in this space in the coming years.
Industries that benefit from various blockchain networks
Several industries can benefit from adopting the appropriate type of blockchain network:
- Finance: Public blockchains enable peer-to-peer transactions, reducing reliance on intermediaries.
- Healthcare: Hybrid blockchains can keep patient data private while sharing research data.
- Supply Chain: Private and consortium blockchains can improve transparency and traceability.
- Government Services: Consortium blockchains can enable efficient, transparent public services.
