Types of Blockchain
Blockchains can be broadly categorized into three main types:
Public Blockchains
As the name suggests, public blockchains are open source, i.e., open to all the willing participants of the network. Anyone is allowed to connect with the network and become a part of core activities. As no one grants authority, they are also known as permissionless blockchains. Public blockchains are secure even though they are open and public. The information which is openly available is the transaction information like wallet number, the amount, and the date. Self-governance and a higher level of security are present in the public blockchain as people universally can proactively read and write the code of the blockchain. The uncontrollability is the main advantage here as nobody will be able to control the whole network. A decentralized network is present in the public blockchain protocol like Bitcoin. These blockchains are known to be fully distributed because the authority on the blockchain is equally divided among the nodes. The principal reason for public blockchains to be secure is each node can load the ledger containing all the transaction information. And due to this, it is challenging to hack as the target is not just one node but hundreds of them. These blockchains are fixed as they cannot be changed without altering the whole blockchain record of all transactions. It is not impossible to hack, but it would be extensively resource-intensive and time-consuming. The P2P nature of public blockchain networks is one of its best features. There is complete financial freedom for a user who wants to perform a transaction from anywhere at any time with another user at a fast speed. A public blockchain has a unique feature, that is, its network- wide consensus mechanism. For achieving consensus, each node is given the right to contribute to the decision. For example, PoW and Dash’s Proof of Stake (PoS). The best example of an open, public blockchain is Bitcoin. Other examples are Ethereum, Stellar, and Dash.
Characteristics:
Decentralization: Fully decentralized, with no central authority.
Transparency: All transactions are visible to anyone on the network.
Security: Secure due to the high number of participants and cryptographic algorithms.
Consensus Mechanism: Typically use Proof of Work (PoW) or Proof of Stake (PoS).
Examples:
Bitcoin: The first and most well-known cryptocurrency, using PoW for consensus.
Ethereum: A versatile blockchain platform that supports smart contracts, initially using PoW but transitioning to PoS with Ethereum 2.0.
Private Blockchains
Private blockchains are restricted networks where only authorized participants can join, make transactions, and participate in the consensus process.
In a private blockchain identified as a permissioned blockchain, access and participa- tion in the transaction are restricted. Private blockchains are mostly used by private organizations where only pre-chosen entities can join the network. The network is centralized, and the central authority is responsible for giving permissions for writ- ing transactions and who can read the particular transaction. The central authority also determines mining rights, which can be overridden or modified. The adminis- trator can give or revoke the permissions granted to a user. These blockchains may or may not have a token, depending on the blockchain proprietor. Some samples of activities in a private blockchain are access, visibility, storage, and execution. In this type of blockchain, the members of the blockchain have knowledge about each other’s identity, but the transaction details remain private. They are faster and provide more efficiency, but security is not strong like public blockchains. Here, the consensus is reached through a single party or selected entities, and hence, it can lead to manipulation even though there is cryptographic security up to some level. One of the private blockchains is IBM’s Hyperledger Fabric which can be deployed in a private network. Users can participate in the network once they are invited to join the network in a private blockchain. To utilize this blockchain for tracking food from the source to the shelves, Walmart partnered with IBM. In this, every, entity from farmers to distributors to retailers, can have permission access to information regarding the source and the current location
Characteristics:
Centralization: More centralized, with control typically in the hands of a single organization or a group of entities.
Permissioned Access: Only selected participants can access and participate.
Efficiency: Generally faster and more efficient due to fewer participants.
Consensus Mechanism: Can use various consensus mechanisms like Practical Byzantine Fault Tolerance (PBFT) or Raft.
Examples:
Hyperledger Fabric: A modular blockchain framework designed for enterprise use cases.
R3 Corda: A blockchain platform designed for financial institutions and businesses.
Consortium blockchains
Consortium blockchains are semi-decentralized, where the consensus process is controlled by a group of pre-selected nodes or organizations.
It can be said that the consortium blockchain is like a hybrid of public and private blockchain. It is also identified as a federated blockchain. It is partially public because it is shared and partially private because access to the blockchain is restricted for the nodes. Some nodes are allowed to participate in the transactions, while some nodes control the consensus process. The network is centralized like the private blockchain, with a single point of failure. The control is not in the hands of a single authority but a few authenticated users. The control is not entirely centralized; it is a blend of centralization and decentralization. Some nodes need to sign off each transaction, while some need pre-approval from the network. Consortium blockchains imitate the benefits of private blockchains by providing enhanced efficiency and transaction privacy. On account of JPMorgan’s cryptographic money, they intend to join their JPM coin along with numerous different banks on their Quorum Blockchain. While some may say it is a private blockchain, it is open to the public (other member banks) up to some extent. The JPM coin on Quorum Blockchain will be first utilized by institutional payment customers of JPMorgan. They can use this consortium blockchain for faster international or local transactions at any time with less cost.
Characteristics:
Controlled Decentralization: Partially decentralized, with multiple organizations sharing control.
Permissioned Access: Access is restricted to the participating organizations.
Scalability and Efficiency: More scalable and efficient than public blockchains.
Consensus Mechanism: Often use consensus mechanisms like PBFT, which are suited for limited participants.
Examples:
Quorum: An enterprise-focused version of Ethereum developed by J.P. Morgan.
Energy Web Chain: A consortium blockchain tailored for the energy sector.
Access
Open to anyone
Restricted to authorized users
Restricted to selected organizations
Control
Decentralized
Centralized
Partially decentralized
Transparency
Fully transparent
Limited transparency
Partially transparent
Efficiency
Less efficient (scalability issues)
More efficient
More efficient
Examples
Bitcoin, Ethereum
Hyperledger Fabric, Corda
Quorum, Energy Web Chain
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