Types of blockchain
different blockchains

Over the years, blockchain, the technology behind bitcoin, has been the subject of interest for many tech enthusiasts. As such, the technology has been applied across several spheres. And this has birthed many different “blockchains” which perform special tasks. But how are these blockchains different, and why do we need so many?

Firstly, blockchains can be grouped into these three major categories:

  • Public blockchain
  • Private blockchain
  • Consortium blockchain

Public Blockchain

The backbone of all blockchains – Public blockchain technology is the original blockchain and the technology behind most cryptocurrencies. As the name implies, a public blockchain is a blockchain that is operated, regulated and sustained by the public. It is not controlled by any single individual. Instead, anyone on the chain can read, write or audit the blockchain. Hence, these types of blockchain are transparent and accessible.

No centralised access point – Public blockchain do not have a centralised point of access. As such, decentralised consensus mechanisms which are known as POW (Proof of Work) and POS (Proof of Stake) are used for decision making.

Typical examples of public blockchains are Bitcoin and Litecoin.

Private Blockchains

Privately-owned and regulated by individuals – Just as its name implies, the private blockchain is operated as the private property of an individual or organisation. Instead of a decentralised point, a central in-charge regulates its operations. Important tasks such as reading, writing and auditing are controlled by the person/organisation in-charge. Access to any of these tasks can only be given to a third party by the person/organisation in-charge.

Access to mining right depend on mood of individuals – Mining rights are also controlled by this centralised point, and decision to or not to give out said rights are at the whim of the person/organisation in-charge. However, since the point of centralisation is trust, the private blockchain is cryptographically secure from the company’s point of view and financially practical.

Example of private blockchain in-use: Quorum (the JPM coin is built on this platform), Hyperledger Fabric

Consortium Blockchain

Somewhat similar to private blockchain –  The word consortium refers to an association, typically several companies or groups. A consortium blockchain uses a similar system as the private blockchain. The only difference is that here, instead of one person in-charge, you have multiple. A selected group of companies or individual representatives work together as the “in-charge” to make decisions for the entire network.

To illustrate, imagine an association of all the banks in Nigeria, on a blockchain that is set up in such a way that if a given number of banks agree on a transaction/decision/block, it would be added to the blockchain. This way, things move faster and you have more than one point of failure. While a consortium is not open to just anybody and is “centralized” to some extent, it has multiple points of failure which protects the whole ecosystem.

An example of a consortium blockchain is Corda.

Now that we have all the definitions out of the way, how did blockchain become a thing that comes in types?

Enthusiasts caused it – This emanates from the argument by some enthusiasts that if there is a centralized control point, then it is not blockchain. While the point is valid considering the initial concept of the blockchain, there are other sides to consider such as how a private blockchain is appropriate to traditional business and governance models and might be the only way to get these organisations onboard. However, that would be the subject of a stand alone article.

Why do we need them all?

All blockchains perform different necessary functions –  Public blockchains can receive or send data from anyone on the network from anywhere in the world. It can be audited by anyone, and each node (think of it as a computer/device that stores transactions that have occurred on the blockchain) has the same power as any other in the chain. Every transaction has to be validated by every node through a process called, chain consensus. These complexities could make it impossible for use in smaller, more targeted networks like banks. For these, the private and consortium blockchains are necessary.

Private and consortium blockchains reduce lengthy vetting processes and the number of trusted parties, thereby making the network faster and more efficient for businesses and organizations.

Where transparency and openness are required, public blockchains are preferred, and where there’s a need for full or partial control, private or consortium blockchains can be implemented. And this, friends, is why the different types of blockchains exist.

This article is in partnership with QuidaxQuidax is a European based digital assets exchange with a focus on Africa. We provide a seamless platform for users to send, receive, buy and sell cryptocurrencies using their local currencies.


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