Types of Blockchain: Public, Private, Hybrid, and Beyond

Types of Blockchain: Public, Private, Hybrid, and Beyond

Dean Decho May 23, 2023
7 min read

Welcome to the exciting landscape of blockchain technology, where decentralization is king, and innovation never sleeps. You might already be familiar with the basics, but in this article, we’re going all-in. We’ll break down the different types of blockchain networks: public, private, and hybrid, and we’ll also delve into sidechain and consortium blockchains.

Understanding Public Blockchain and its Significance in Cryptocurrency

Private blockchains are a stark contrast to their public counterparts. They function as authorized networks, accessible only to approved participants. The transactions on these networks aren’t visible to the public eye. Instead, they are verified through a consensus process among network members.

Multichain stands as a shining example of a private blockchain. While consortium blockchains feature multiple selected participants (often multiple organizations), a private blockchain is controlled exclusively by a single entity. For most applications, a private blockchain might be overkill and could be substituted with a decentralized database. Thus, the use-case must be thoroughly examined before implementing a private blockchain, as there might be a more suitable technology that fits the bill.

The Intricacies of Private Blockchain

bitcoin public blockchain

A private blockchain is an authorised network that only approved participants can join and access. Transactions on a private blockchain are not publicly visible, but are verified through a consensus process between network members.

Multichain is an example of a private blockchain. While a consortium blockchain has multiple selected participants (e.g. multiple organisations), a private blockchain has a single participant who has exclusive control over the rules of the blockchain. For most applications, a private blockchain is not necessary and can be replaced by a decentralised database. If a private blockchain is to be implemented, the use case must be analysed carefully. It is likely that a more suitable technology exists.

The Best of Both Worlds: Hybrid Blockchain

As the name suggests, a hybrid blockchain integrates features of both public and private blockchain networks. These are often employed in business scenarios where multiple organizations require secure data sharing. Hybrid blockchains are capable of publicly sharing certain information while keeping other data private, striking a balance between security, transparency, and privacy.

Hyperledger Fabric, an open-source framework for crafting blockchain applications, exemplifies a hybrid blockchain. Its flexible plug-and-play components can be tailored to satisfy specific application requirements, rendering it suitable for various sectors, from banking to healthcare and supply chain management.

EOSIO is another exemplar of a hybrid blockchain, which serves as a platform for building decentralized applications. It adopts a delegation model that lets users elect block producers for transaction approval and block addition to the blockchain. Block producers are chosen by the community and rewarded for their services, providing features like account and permission recovery – a boon for enterprise applications.

Sidechain blockchain

A sidechain blockchain operates in tandem with another blockchain. While the transactions on the sidechain are visible on the main blockchain, they are not validated by it. This opens up opportunities for greater transaction diversity and privacy.

Real-world sidechain examples include Liquid Network and RootStock (RSK) in Bitcoin. As these sidechains are tethered to Bitcoin’s primary network, they only facilitate Bitcoin-related activities. Liquid Network, developed by Blockstream, is an open-source sidechain anchored to Bitcoin’s main network. Leveraging unique sidechain features, Liquid Network’s block discovery time is a mere one minute, significantly outpacing Bitcoin’s 10-minute block discovery time. This implies that ten times more blocks can be integrated into the sidechain compared to Bitcoin’s blockchain, allowing users to transact digital assets more privately, thus concealing the amount and type of assets transferred.

Authorized Blockchain: A Quick Overview

In a nutshell, an authorized blockchain is a network accessible exclusively to approved participants. Transactions on these networks aren’t publicly accessible and are instead validated via a consensus process among network members.

The Innovation of Sharded Blockchains

Sharding is a technological revolution that has taken the blockchain world by storm. Sharded blockchains represent a novel approach to addressing the issues of scalability and speed in blockchain networks.

In the realm of databases, sharding is a concept that involves splitting a larger database into smaller, more manageable parts known as ‘shards’. Each shard contains a portion of the data, making it possible to process transactions faster and more efficiently.

Translating this concept to blockchain, sharded blockchains divide the network into smaller pieces or ‘shards’, each capable of processing its transactions and smart contracts. This means that not every node has to process every transaction, leading to a significant increase in network capacity and speed.

Ethereum 2.0, often dubbed as “Eth2” or “Serenity”, is a prime example of a sharded blockchain. The update aims to enhance the scalability, security, and sustainability of Ethereum by shifting its existing Proof-of-Work consensus algorithm to Proof-of-Stake (involving validators instead of miners) and implementing shard chains.

Comprehending DAG-Based Blockchains

Another intriguing addition to the blockchain family is DAG-based blockchains. Standing for Directed Acyclic Graph, DAG represents a different data structure from a traditional blockchain. While traditional blockchains are linear, meaning each block is linked to the previous one, DAG-based blockchains allow multiple blocks to co-exist simultaneously, with each block directly connected to several others.

This structure is designed to eliminate the need for block confirmation times, miners, and high transaction costs, which are common challenges with standard blockchains. Transactions validate each other, ensuring high-speed transactions and scalability.

IOTA is a stellar example of a DAG-based blockchain. Known as “the blockchain for the Internet of Things (IoT)”, IOTA uses its own unique DAG called the “Tangle”. Transactions on the Tangle are free, confirming two previous transactions each time a new one is added to the network. This mechanism ensures faster transactions as more participants join the network.

Wrapping up with Federated or Consortium Blockchains

Adding another layer of depth to our blockchain exploration, we arrive at consortium blockchains. Also known as federated blockchains, these are characterized by being managed by a group of institutions rather than a single entity.

These blockchains are a favorite in enterprise applications where several organizations need a secure platform for data exchange. Consortium blockchains have a higher level of security due to their decentralized nature compared to private blockchains.

The process of creating consortiums, however, can pose a significant challenge, as it requires harmonizing the efforts of multiple organizations. Furthermore, not all supply chain participants may have the technical capacity to implement blockchain tools, and the initial cost of digitizing data might be too steep.

R3, an enterprise software firm, has developed a popular suite of consortium blockchain solutions suitable for the financial services sector and beyond. For the supply chain sector, CargoSmart’s Global Shipping Business Network, a non-profit blockchain consortium, has emerged as a significant player, aiming to digitize shipping and foster collaboration among maritime operators.

In summary, the world of blockchain is as diverse as it is innovative. As the technology continues to evolve, new types and applications of blockchain networks will undoubtedly continue to emerge. From public and private to hybrid, sharded, DAG-based, and consortium blockchains, this technology’s potential to revolutionize industries is virtually limitless.

Conclusion

As we traverse the dynamic and intricate terrain of blockchain technology, we discover a world imbued with incredible diversity, innovation, and potential. We’ve taken a deep dive into public, private, hybrid, sharded, DAG-based, and consortium blockchains, each with their unique attributes and applications. Blockchain’s transformative capacity remains boundless, set to redefine the paradigms across various sectors. Undoubtedly, as this technology continues to evolve, we can anticipate the emergence of new blockchain types and applications, further fortifying its position as a digital revolution.

Frequently Asked Questions (FAQs)

What is a public blockchain?

Public blockchains are decentralized networks open to anyone. They don’t require authorization to join, making them completely decentralized. Transactions on public blockchains, such as Bitcoin and Ethereum, are publicly visible.

How is a private blockchain different from a public blockchain?

Unlike public blockchains, private blockchains are networks that only approved participants can join. Transactions on private blockchains aren’t publicly visible but are verified through a consensus process among network members. Multichain is an example of a private blockchain.

What does a hybrid blockchain represent?

Hybrid blockchains combine the characteristics of public and private blockchains. They are ideal for business scenarios requiring secure data sharing among multiple organizations. Hyperledger Fabric and EOSIO are examples of hybrid blockchains.

What is sharded blockchain?

Sharded blockchains divide the network into smaller pieces or ‘shards’, each capable of processing its transactions and smart contracts. This increases network capacity and speed, solving issues of scalability. Ethereum 2.0 is implementing shard chains as part of its update.

What are DAG-based blockchains?

DAG (Directed Acyclic Graph) based blockchains are a unique data structure that allows multiple blocks to co-exist simultaneously. DAG-based blockchains, such as IOTA, are designed to eliminate the need for block confirmation times, miners, and high transaction costs, thus ensuring faster transactions and scalability.

What’s a consortium blockchain?

Consortium blockchains, also known as federated blockchains, are managed by a group of institutions rather than a single entity. They are often used in enterprise applications for secure data exchange. A popular example is the suite of solutions developed by the software firm, R3.

Dean Decho

Dean is a passionate advocate for the financial freedom and independence offered by Bitcoin and the cryptocurrency space. He's built this crypto learning platform to help others in the industry learn, grow and be part of it.