When people talk about blockchains, they often refer to the public ledgers behind cryptocurrencies like Bitcoin or Ethereum. However, not all blockchains are created equal. There are several types of blockchains that each function differently.
But first, what is blockchain? Simply put a blockchain stores information. More specifically, it’s an immutable, distributed digital ledger. That means the information is shared among several participants in the network. These participants must reach a majority consensus regarding the validity of each piece of data on the blockchain.
Once data is added to the blockchain, it can’t be altered or reversed. As a result, blockchains preserve data integrity and security without oversight from centralized authorities like banks or governments.
Blockchains can store any kind of tangible or intangible data. So, they’re useful for other things besides recording cryptocurrency transactions. For example, blockchain facilitates the transfer of digital assets like NFTs. It serves as the immutable ledger that NFTs need to track records of authenticity.
Outside of the digital realm, blockchain has many real-world applications. It can verify election polls, store healthcare records, or increase the efficiency of electricity grids. It can even track the journey of food from the farm to your table.
Below, we’ll dive deeper into the different types of blockchains and their use cases. If you’d like to learn more about blockchain technology in general, read our complete guide here.
Since there are so many different use cases for blockchain, several different types were developed. Each one serves a specific purpose. Some prioritize security, while others focus on privacy or scalability.
The four main types of blockchains are public, private, hybrid, and consortium (also referred to as federated).
Public blockchains are open to everyone and operate on a decentralized network. No permission is needed to interact with a public blockchain.
Essentially, anyone with an internet connection can read data on the public ledger or conduct transactions. They can also participate in the consensus process through activities like mining or staking.
Public blockchains are often used for cryptocurrency. For example, Bitcoin’s blockchain is public. That means all BTC transactions are published, and anyone can access these transaction details. You can even go back and view the very first block transaction ever recorded.
A private blockchain is governed by a central authority. This organization controls who can participate in the network and maintain the ledger. Only those with permission can gain entry to the network and view transaction data.
Each private blockchain can be tailored to suit the needs of its governing body. They’re often used by commercial enterprises that prioritize privacy and transaction efficiency. Since these companies may not want outside actors to access their blockchain, the permission system keeps the blockchain data secure.
While private blockchains are controlled by a single entity, they still need multiple network nodes. Each one keeps a copy of the blockchain and verifies transactions. In this way, the ledger is distributed but not decentralized.
Hybrid blockchains combine the privacy of a private blockchain with the security of a public blockchain. Usually, they’re controlled by a single organization. Still, the network requires a level of oversight from public validators.
It allows organizations to keep some data private while still taking advantage of greater security and transparency of public blockchains.
Consortium blockchains are similar to private blockchains. They require specific permissions to join and interact with the network. However, the network is governed by a group, not a single organization.
These blockchains offer the same benefits as private blockchains, such as privacy, speed, and scalability. However, they are more secure than private blockchains due to the higher level of decentralization.
Consortium blockchains require different organizations to cooperate and act in the best interest of the shared network. This can be challenging but removes total control from the hands of a single party.