Different Types Of Blockchains In The Market and Why We Need Them

Bitcoin introduced the ‘Blockchain‘ tech to the world.

We all know that it started with Satoshi Nakamoto’s whitepaper in 2008 and the first Bitcoin getting mined in 2009. It all started with a vision to make an alternative P2P currency.

Soon this Bitcoin network was copied, forked and updated to make better cryptocurrencies such as Litecoin, DASH etc by numerous crypto enthusiasts, which are now popularly called altcoins.

Soon after this popularization of altcoins companies, governments and consortiums started looking into the underlining technology of these cryptos i.e. Blockchain.

And the hype started that Blockchain is the real invention and not the Bitcoin

And at the time of writing this hype has become so much hyped up that it has blurred the whole difference between the blockchain of P2P currencies (Bitcoin, DASH, Litecoin etc) and the blockchain developed by the companies, governments, and consortiums.

So today’s let us brush off some of this blurriness by looking closely at different types of blockchains and why we need them.

Do read: The Ultimate Guide To Understanding What A “Blockchain” Is & How It Works

Types Of Blockchains

Types Of Blockchains

There mainly three types of Blockchains that have emerged after Bitcoin introduced Blockchain to the world.

  1. Public Blockchain
  2. Private Blockchain
  3. Consortium or Federated Blockchain

There are some more complicated types also such as public-permissioned blockchain, private-permissioned blockchain etc but I will keep it simple for this discussion.

Now Let’s discuss all the three one by one.

1. Public Blockchain

A public blockchain as its name suggests is the blockchain of the public, meaning a kind of blockchain which is-‘ for the people, by the people and of the people’

Here no one is in charge and anyone can participate in reading/writing/auditing the blockchain. Another thing is that these types of blockchain are open and transparent hence anyone can review anything at a given point of time on a public blockchain.

But a natural question that comes to our mind is that when no one is in charge here then how the decisions are taken on these types of the blockchain. So the answer is that decision making happens by various decentralized consensus mechanisms such as proof of work (POW) and proof of stake(POS) etc. Read more about POS and POW here.

On Bitcoin and Litecoin blockchain networks anyone can do the following things that make it truly public blockchain.

—>Anyone can run BTC/LTC full node and start mining.

—>Anyone can make transactions on BTC/LTC chain.

—>Anyone can review/audit the blockchain in a Blockchain explorer.

2. Private Blockchain

Private blockchain as its name suggests is a private property of an individual or an organization.

Unlike public blockchain here there is an in charge who looks after of important things such as read/write or whom to selectively give access to read or vice versa.

Here the consensus is achieved on the whims of the central in-charge who can give mining rights to anyone or not give at all.

That’s what makes it centralized again where various rights are exercised and vested in a central trusted party but yet it is cryptographical secured from the company’s point of view and more cost-effective for them.

But it is still debatable if such a private thing can be called a ‘Blockchain’ because it fundamentally defeats the whole purpose of blockchain that Bitcoin introduced to us.

In such types of blockchain:

—>Anyone can’t run a full node and start mining.

—>Anyone can’t make transactions on the chain.

—>Anyone can’t review/audit the blockchain in a Blockchain explorer.

3. Consortium or Federated Blockchain

This type of blockchain tries to remove the sole autonomy which gets vested in just one entity by using private blockchains.

So here instead of one in charge, you have more than one in charge. Basically, you have a group of companies or representative individuals coming together and making decisions for the best benefit of the whole network. Such groups are also called consortiums or a federation that’s why the name consortium or federated blockchain.

For example, let suppose you have a consortium of world’s top 20 financial institutes out which you have decided in the code that if a transaction or a block or decision is voted/verified by more than 15 institutes then only it should get added to the blockchain.

So it is a way of achieving thing much faster and you also have more than one single point of failures which in a way protects the whole ecosystem against a single point of failure.

In such type blockchain:

—>Members of the consortium can run a full node and start mining.

—>Members of the consortium can make transactions/decisions on the chain.

—>Members of the consortium can review/audit the blockchain in a Blockchain explorer.

Why We Need Them

Public Blockchain Private Blockchain Consortium or Federated Blockchain
Anyone can run BTC/LTC full node Anyone can’t run a full node Selected members of the consortium can run a full node
Anyone can make transactions Anyone can’t make transactions Selected members of the consortium can make transactions
Anyone can review/audit the blockchain Anyone can’t review/audit the blockchain Selected members of the consortium can review/audit the blockchain

After understanding all three different types I had a question that why do we need all of them?

I was also critical of that, private and consortium blockchains are not even blockchains because I was comparing them with public blockchains such as Bitcoin and Litecoin etc.

But after some more diligence and brainstorming, I could understand that why we need the other two versions apart from the public one. (whatever one may call them)

We require more types of blockchain because keeping such blockchains solves problems such as:-

  1. One no longer need to rely upon huge servers.
  2. They are cost effective and fast.
  3. They reduce the need for more trusted parties because you can implement smart contracts instead of them.
  4. Gives options for rights and access management while leveraging the same blockchain technology and reaping its benefits.
  5. Reduces redundant work.
  6. Distributed consensus between interested parties becomes fast even though you are geographically segregated.

Because of all these, I think different types of blockchain will be used for different type of industries as and when required.

Where we require privacy and control, private & consortium blockchain will be a good option and where we require openness, as well as censorship resistance public blockchains, are a must need.

And that’s why different people are discussing different use cases of the blockchain tech across various industry verticals.

Nevertheless, time will only tell how far each type of these blockchains go and who will be the winner.

Until that time subscribe to CoinSutra and keep learning about the blockchain revolution!

Now I want to hear from you: What do you think about blockchain technology? What’s your thought on different types of blockchains? Let me know in the comments section below.

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5 thoughts on “Different Types Of Blockchains In The Market and Why We Need Them”

  1. Pishu Shamdasani

    Hey Sudhir you rock…thanks for educating us about the different block chains..this is like opening up 3 wide gates to various corporations across all major industries trying to take advantage of the Blockchain multiple technologies each according to their own vision.All this shows Blockchain is here to stay for a long time creating vast opportunities.
    In my opinion that which can effect these multiple block chains in time will be iot. What do you think?Do let me know your views.

    1. Sudhir Khatwani

      IOT is good but as far as I know, their cryptography is weak.
      Might you soon see a better implementation in the future.

  2. Kavitha Ravinuthala

    Which is the best block chain implementation in the market based on various parameters like scalibility,security,implementation etc

  3. sandeep

    thanks for the post, in a private blockchain, i understand that each node will have a distributed ledgers, but who are the miners and what is the incentive? thanks

    1. Harsh Agrawal

      Miners can be any chosen ones and not sure about incentive because this doesn’t require one. Also, the power to harvest or mine itself is an incentive, sole authority or a member of the authoritative board.

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