Types Of Blockchain

In this Blockchain tutorial, we are going to learn about different types of blockchain. In this, we will also try to cover the merits and demerits of some types of blockchains. Here is the list of topics that we will cover.

Public Blockchain
Private Blockchain
Hybrid Blockchain
Consortium Blockchain
Advantages of Public Blockchain
Disadvanatages of Public Blockchain
Advantages of Private Blockchain
Disadvantages of Private Blockchain

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Blockchain can be categorized into many categories based on how it has evolved over the years. Now, each type has its own set of advantages and disadvantages based upon some technical or business perspective.

Now, primarily, there can be two types of blockchain. The first one is the public blockchain, and the second one is the private blockchain. However, there are some different variants too which we will discuss further in this post.

But, before we deep dive into these types of blockchain. Let’s first understand some of the common characteristics of these types of blockchain.

Every blockchain consists of a group of nodes connected in a peer-to-peer (P2P) network.
Each node in the network holds a copy of the shared ledger. And this ledger gets updated on a regular basis.
Each node has the ability to validate transactions, send and receive transactions, and create blocks.

Now, let’s have a look at some of the different types of blockchain. And also understand their usability in detail.

Also, read, Blockchain Architecture

Public Blockchain

As the name suggests, this type of blockchain is not owned by anyone and is open to the public. So, anyone who has access to the internet can sign, take part as a node, and involve themselves in the process of making some decisions.

It is like a permissionless, non-restrictive distributed ledger system where users could or could not be awarded for their participation. All users of this permissionless ledger hold a copy of the ledger on their local systems.

And they use a distributed consensus technique to identify the final state of the ledger.

An authorized user in this type of blockchain network has access to all the past and current records. Also, users can perform tasks like verifying a transaction and mining a new block.

The most common examples related to public blockchain are Bitcoin, Ethereum, and Litecoin.

Read Consensus in Blockchain

Advantages of Public Blockchain

After getting a clear idea about what is a public blockchain. Now, let’s see some of the advantages of this type.

Transparent: The public blockchains are open and transparent. As in this network, a copy of all the blockchain records is maintained at each node in the network. And anyone over the internet can participate in this network.
Trustable: In a public blockchain, nodes or participants don’t need to worry about about other nodes in the network. Because there are different algorithms that a blockchain can use to assure there is no fraud.
Secure: The public blockchain networks are usually large in size as compare to any other type because they are open to the public. This feature related to a public blockchain makes it more secure. Because the larger the size of the network, the greater the distribution of records and harder it to hack. Additionally, each node needs to verify the transaction which makes it more secure.

Read Decentralization in Blockchain

Disadvantages of Public Blockchain

Now, let’s discuss some of the disadvantages of this type of blockchain. The list of disadvantages is given below.

Low transaction processing: In a public blockchain, the rate of transaction per second is very low. The main reason behind this is the size of the blockchain network. In a public blockchain, the number of nodes in the network is huge. And verification of transactions and proof-of-work from each node is a time-consuming process.
Scalability Issues: The low transaction processing in the public blockchain also causes issues related to scalability. Because if we try to increase the size of the blockchain then, the nodes will increase, and again transaction processing becomes slower.
High Energy Consumption: In blockchain processes like proof-of-work are high energy-consuming processes. Because it requires specialized hardware components to execute a special algorithm. And It is a problem from both an environmental and a financial aspect.

Read Blockchain Uses Other than Currencies

Private Blockchain

As the name suggests, these types of blockchains are not open to the public. They are only open to a group of participants who have decided to share the ledger between them.

These blockchains are restrictive or permission blockchains that are operated only in a closed network.

Private blockchains are typically used within a company or organization where just a few people are allowed to participate in a blockchain network.

Additionally, the level of security, authorizations, permissions, and accessibility is controlled by the owning organization.

The most common examples related to private blockchain are Ripple, Multichain, and Hyperledger.

Advantages of Private Blockchain

After getting a clear idea about private blockchain. Now, let’s see some of the advantages of this type of blockchain.

Speed: In private blockchains, the rate of transactions per second is high as compared to public blockchains. The main reason behind this is the limited number of nodes in the private network. Due to the fewer number of nodes, it takes less time in the verification of a transaction.
Scalability: Private blockchains are much more scalable as compared to the public blockchain. As in this network, we can choose the size of our blockchain. For example, an organization can create a private blockchain with a maximum of 10 nodes. And later they can also increase the number of nodes in the network. This makes a private blockchain scalable as well as flexible.

Disadvantages of Private Blockchain

Now, let’s discuss some of the disadvantages of private blockchain. The list of disadvantages is given below.

Centralized: Private blockchains are not purely decentralized in nature. In private blockchains, we generally need to use a central Identity and Access Management (IAM) system. This system helps in mentoring and administrative tasks related to blockchain. For example, deciding the level of access of data in the blockchain, deciding the number of nodes in the blockchain. This entire system is against the idea of decentralization in the blockchain.
Security: In private blockchains, the number of nodes in a network is limited. Due to this, these types of blockchains are more vulnerable. For example, if any node gets access to the central system then, it can get access to all the nodes in the network.
Trust-Building: Trust-building is one of the main disadvantages of the private blockchain. Because authorized nodes must be trusted to verify and validate genuine transactions.

Read Hashgraph vs Blockchain

Hybrid Blockchain

In a Hybrid blockchain, some part of the blockchain is public and some of it is private. Basically, It is a combination of both public and private blockchains. In this type of blockchain, users can control who should have access to the data in the blockchain.

In this blockchain, a selected portion of the data in a blockchain can be made public while keeping the rest private.

Additionally, a transaction in hybrid blockchains is usually verified by the private network. But, a transaction can also be distributed in the public network for verification.

This hybrid system can be utilized in cases where the private part of the blockchain is kept confidential and shared only with known participants. While the public part of the blockchain can be used by everyone.

Some common examples of hybrid blockchain are Dragonchain and XinFin’s Hybrid blockchain.

Consortium Blockchain

Now, there is one more type of blockchain which is quite similar to a private blockchain. This type is also known as a federated blockchain.

This blockchain is an innovative method for solving the organization’s need who want both public and private blockchains together.

In a consortium blockchain, some part of the blockchain is public whereas some part is private. Additionally, in the private blockchain, only one organization is involved in managing the whole blockchain.

But, in the consortium, more than one organization manages the blockchain network.

Federated Blockchain Network — **Consortium Blockchain**

In consortium blockchain, more than one organization is involved in the network as a node, exchange information, or execute mining. And this type of blockchain is generally used by banks, governments, and organizations.

Some common examples of consortium blockchain are Energy Web Foundation, R3, etc.