We have discussed blockchain in the previous blogs. Do you know how many types of blockchains there are? With the rise of Bitcoin and other cryptocurrencies, blockchain technology has become more familiar to the public. More companies are planning to adopt blockchain technology into their existing businesses. However, they might just have a little knowledge about it that makes choosing chains a bit difficult. Here, we are going to introduce three different types of blockchain in detail.
Three types of blockchain
1. Public blockchain
Public blockchains are those chains that everyone can access, send, receive or authenticate transactions. This is a protocol whereby people around the world can participate through the internet. The public blockchain is also considered “completely decentralized” because it does not belong to any group or organization, and there is no third party involved in it. Data cannot be modified once published and transactions are anonymous and public. It is completely decentralized without third-party supervision. Examples of public blockchain are Bitcoin and Ethereum.
Although public blockchain perfectly interprets the technology, there are still shortcomings in actual operations. Since the public blockchain is completely decentralized, its governance requires participants to fully reach a consensus to run which results in slow update iterations. Also, the initial cost of developing a public blockchain is extremely high, make it nearly impossible to develop an own chain without help from experts.
2. Permissioned blockchain
Permissioned blockchain has a right-granting mechanism that makes it slightly different from public blockchain with more limitations. It is known as a kind of undisclosed and private blockchain since its authority belongs to an organization that is not completely decentralized. However, permissioned blockchain is also a decentralized ledger but they use specific intermediaries to assist in reaching consensus or conducting transactions.
Although the permissioned blockchain is only partially decentralized which is somewhat contradictory to the characteristics of the blockchain itself, it still retains some of the characteristics of the blockchain – all the data is unchangeable. However, the permissioned blockchain requires a specific intermediary to assist in reaching a consensus. The entire transaction speed is faster and its cost is lower. Ripple is an example of a permissioned blockchain.
However, as the permissioned blockchain is not completely decentralized, the tokens issued by it may be manipulated and the risks are high. Based on the characteristics of Permissioned blockchain, centralized software is vulnerable to hacker attacks and asset protection might be difficult without a dedicated team to support.
3. Consortium blockchain
Consortium blockchain is essentially a kind of permissioned blockchain that is also partially decentralized and its transaction does not involve a third party at all. There are subtle differences between the public blockchain and permissioned blockchain. The permissioned blockchain applies to an enterprise while the consortium blockchain applies to an entire production chain – it provides services and it operates under a alliance formed by multiple organizations.
The application of the consortium blockchain makes information of the production chain more transparent and allows specific personnel to view records at any time. Based on some centralized features, the entered data cannot be easily modified by a single organization. The most significant feature is that the encryption mechanism of the consortium blockchain solves important privacy and security issues among enterprises. Hyperledger is an example of a consortium blockchain.
In short, blockchains are divided into public blockchains and permissioned blockchain roughly. Permissioned blockchain runs faster and the cost is relatively low. Due to the permission mechanism implemented to the permissioned blockchain, participation qualifications will be restricted and their identities will not be completely anonymized. If any businesses want to adopt blockchain technology, it is always safe to refer to the latest market information and consult a blockchain technology firm before making a decision.