When people hear the word “blockchain,” many believe that it refers to just one single blockchain. This isn’t the case. There are three types of blockchain, each with its own characteristics and uses. Blockchain is the technology behind cryptocurrency and is now being used in other industries, such as law and healthcare. This electronic ledger validates and secures transactions, which can be numeric or text, in the form of smart contracts. It is important to know the types of blockchains so you can choose the right amount of transparency for your needs. The three types are public, private and consortium.
Public Blockchain – This is the most common type of blockchain as it is used for cryptocurrency transactions (e.g. Ducatus coin). It is open to the public, which means anyone (a participant) can join the network, including miners, developers, and users. The transactions are transparent in that participants can examine transaction details. However, the identity of the person making the transaction is kept hidden. Since miners have access, there are tokens to reward per the proof-of-work process. It also uses a decentralized server, in which no entity governs it.
Private Blockchain — This is the opposite of a public blockchain in that the network is closed and participants need permission to join. It is also called a permissioned blockchain. Why join a private blockchain? To safeguard sensitive data while collaborating with other members. Only those who have consent can see what is on a private blockchain. It is more controlled because it is centralized; an entity governs the network (e.g. an institution). The entity can choose what permissions to give to certain members. Thus, there is a high level of privacy because data is made visible to members of the network.
Consortium Blockchain — It is a hybrid of the private and public blockchains since is it open to like-minded members and is governed by a group. What is interesting about this blockchain is that companies utilize it to reduce development costs and time with the other members via shared resources and platforms. As a result, there are many specialized consortiums, such as financial services, energy, and healthcare. The collaboration between the companies works to solve industry problems as well as to improve speed and security.
Since blockchain is slowly being mainstreamed into the business world, it is only fitting that there are different types. As with any technology, it is amazing how advanced blockchain has become. The world will soon transition to a completely digital ecosystem, in which privacy and security will be the highly valued attributes of a blockchain-based business.