As blockchain technology advances, at least four types of blockchains have been developed: public blockchains, private blockchains, consortium blockchains, and hybrid blockchains. The type of blockchain used by a project’s development team will be tailored to the project’s needs and objectives.
Public Blockchain
Public blockchains allow anyone to access and participate in the network. Public blockchains operate on a decentralized basis, eliminating the need for permission from a central authority. Every network participant can participate as a node responsible for processing transactions. Public blockchains generally use Proof of Work or Proof of Stake consensus.
The advantage of a public blockchain is that all transactions recorded in a block are interconnected, providing security and transparency with a complete record of all previous transactions. However, the disadvantage is that it requires a lot of energy to verify thousands of transactions per second. Public blockchains are implemented in Bitcoin, Ethereum, Litecoin, Monero, and Solana.
Private Blockchain
Private blockchains are closed networks used by specific companies or organizations, where control and access are regulated by the network owner. Private blockchains are not fully decentralized because only a portion of their data is open to the public.
Private blockchains are used for specific corporate purposes, such as managing intellectual property rights, internal applications for logistics needs, financial records, payroll, and even sensitive company records. While they offer faster transaction processing and improved data security, private blockchains have disadvantages such as a lack of decentralization and potential risks due to a lack of transparency. Examples of private blockchain implementations can be seen in Ripple and Multichain.
Consortium Blockchain
Consortium blockchains are designed by a group of companies or organizations using private blockchains for specific purposes. Consortium blockchains are a semi-decentralized type, allowing companies to improve their business performance. Consortium blockchains differ from private blockchains, where the private blockchain is managed by a single company or organization.
The advantage of consortium blockchains is that they can balance centralized and decentralized systems, minimize risks and costs, and increase the effectiveness of collaboration between companies. However, consortium blockchains also pose challenges such as management and coordination between companies and the potential for conflict arising from differing goals and strategies among members. Examples of consortium blockchain applications include Quorum, Hyperledger, and Corda.
Hybrid Blockchain
A hybrid blockchain, or semi-decentralized blockchain, combines private and public blockchains. This concept allows some data to be publicly accessible while sensitive data remains private. The advantages of a hybrid blockchain include flexibility in data management and increased transaction speeds.
Managing both a private and public blockchain simultaneously is complex and resource-intensive. Furthermore, hybrid blockchains also pose implementation challenges, such as maintaining a balance between privacy and transparency.