In general, as we see from diagram above, blockchains can be permissionless, permissioned or both. This classification is based on the blockchain’s access policies and rights management.
To join a permissionless blockchain, you do not need permission. In other words, permissionless blockchains enable anybody to join the blockchain anonymously and do not limit the privileges of the nodes on the network. A permissioned blockchain, on the other hand, requires permission from a central authority to join. These blockchains limit which nodes have access to the network and may also limit the privileges of those nodes on the network. The identities of users in a permissioned blockchain are known to the other users of that blockchain.
Regardless of the abovementioned diversification, a number of experts agree that there are four main types of blockchains.
Because public blockchains have no limits, they are referred to as permissionless, implying that anybody with internet connection may join and become an authorized node. Public blockchains provide all blockchain nodes equal access to the blockchain, allowing them to produce new blocks and validate newly added blocks of data. Because the source code for these blockchains is open source, anybody on the blockchain may detect faults, offer modifications, or contribute new features.
Public blockchains are ideal for organizations that are built on trust and transparency, for instance, social support groups or non-governmental organizations. Because of the public nature of the network, and network's transparency, private businesses will likely want to steer clear of Public Blockchains.
Public blockchains are mostly utilized for cryptocurrency trade and mining at the moment. Bitcoin, Ethereum, and Litecoin are examples of prominent public blockchains. Because of its decentralized structure, it need a way for confirming data validity. Participants or nodes in the blockchain achieve a specific agreement on the present state of the ledger using a consensus technique. Proof of work (PoW) and proof of stake (PoS) are two common consensus methods and I wrote about them in a previous blog.
Because public blockchains have no limits, they are referred to as permissionless, implying that anybody with internet connection may join and become an authorized node. Public blockchains provide all blockchain nodes equal access to the blockchain, allowing them to produce new blocks and validate newly added blocks of data. Because the source code for these blockchains is open source, anybody on the blockchain may detect faults, offer modifications, or contribute new features.
Public blockchains are ideal for organizations that are built on trust and transparency, for instance, social support groups or non-governmental organizations. Because of the public nature of the network, and network's transparency, private businesses will likely want to steer clear of Public Blockchains.
Public blockchains are mostly utilized for cryptocurrency trade and mining at the moment. Bitcoin, Ethereum, and Litecoin are examples of prominent public blockchains. Because of its decentralized structure, it need a way for confirming data validity. Participants or nodes in the blockchain achieve a specific agreement on the present state of the ledger using a consensus technique. Proof of work (PoW) and proof of stake (PoS) are two common consensus methods and I wrote about them in a previous blog.
Private blockchains are networks that operate in a constrained context, such as a closed network controlled by a single entity. Private blockchains administered by a single entity, also known as managed blockchains, are permissioned blockchains in which the central authority selects who can be a node. That same central authority is not required to provide each node similar rights. Some businesses, for example, may create a private blockchain and decide which nodes have access to view, contribute, or alter data. As an important feature, private blockchains can also prevent third parties from accessing certain protected information. Some notable examples of private blockchains are B2B virtual currency exchange networks Ripple and Hyperledger, open-source projects created to support blockchain-based applications.
Both public and private blockchains have flaws. Public blockchains have longer validation processes for new data than private blockchains due to their nature, while private blockchains are more prone to fraud. Consortium and hybrid blockchains were created to overcome these challenges.
Consortium blockchains, also known as federated blockchains are a combination of public and private blockchains and contain centralized and decentralized features. Essentially, a consortium blockchain is a private blockchain limiting access to a particular group. By a group controlling a blockchain, one eliminates the risks that come with a single entity controlling the network on a private blockchain.
In a consortium blockchain, one can control consensus procedures by so-called preset nodes. A validator node initiates, receives and validates transactions. Other nodes, called member nodes, can receive or initiate transactions. These types of blockchains, enjoys more decentralization than private blockchains, and therefore have higher levels of security. Although, setting up consortium blockchains can be difficult and a tedious process, as it requires coordination between a number of organizations which consequent emphasizes logistical challenges. Consortium blockchains can be compromised if a member node is breached and so, the blockchain's own regulations can be an obstacle in the network's functionality.
Banking services and payment systems are common uses for this type of blockchain. Different banks can form a consortium, deciding together which nodes will be the validator nodes and validate the transactions. Research organizations can create a similar model or organizations that want to track food. Consortium blockchains are an ideal solution for companies that have a large supply chain, especially in the food, pharmaceutical and other industries with sourced materials.
Hybrid blockchains are blockchains that are controlled by a single organization, but with a level of oversight performed by a public blockchain, which is required to perform validations of certain transactions. A private entity may own the hybrid blockchain, but it does not mean that it can change the transactions that are performed on it. When a person joins a hybrid blockchain, they have full access to the network. Unless they participate in a transaction, that user's identity is safeguarded and protected from other users.
Transactions on a hybrid blockchain are inexpensive since only a few nodes are required to verify them. They are also quick to validate since the hybrid blockchain just requires a few nodes. In addition, hybrid blockchains are more scalable than public blockchain networks.
A notable example of a hybrid blockchain is “Food Trust” from IBM which was developed to improve efficiency throughout the whole food supply chain.
Also, there is another type of blockchain that exists which are called sidechains. A sidechain is a blockchain that can run in parallel to the main chain. Sidechains allow users to move digital assets between two different blockchains. By doing that, it can improve scalability and efficiency. A liquid Network is a great example of a sidechain.
In the image below, there is an overview on the 4 major types of blockchains and what to consider when choosing a blockchain to tackle the issues you are facing.
