Back in 2009, Satoshi Nakamoto created the first public blockchain: Bitcoin. This first blockchain type had one goal—creating a decentralized financial network where people had power over their money instead of traditional institutions.
Today, there are four main types of blockchain: public, private, consortium, and hybrid blockchain. Each one has its own distinct features and purposes, ranging from health to real estate and even sports.
This article covers the different blockchain types, their characteristics, use cases, and key differences.
Public Blockchains
Public blockchains such as Bitcoin are open and can be used by anyone anywhere. They operate on the principles of decentralization and openness, and all individuals can view all the completed operations’ history.
These types of blockchain are suitable for applications with a high degree of trust and openness. Its usage can range from sending/receiving money or to powering voting systems or even tracking supplies.
Private Blockchains
Private blockchains are the exact opposite of public blockchains. They operate within a closed network, and anyone who wants to access it must get authorization. Most times, private blockchains are used within a single organization, like a bank.
The upside of this type of blockchain is that it allows for greater control over data and transactions. Also, it features quick transaction speeds making it suitable for industries requiring efficiency and confidentiality.
However, these benefits come at the expense of the transparency and decentralization that comes with their public counterpart.
Some of the key areas where some enterprises have applied private blockchains include, record-keeping, asset tracking, and supply chain management.
Consortium Blockchains
Otherwise called federated blockchains, consortium blockchains are characterized by a blend of elements in both public and private models.
Here, multiple organizations share control over the network, allowing for collaborative governance. However, access is limited to maintain some level of privacy. Also, consortium blockchains are less transparent than public blockchains.
Sectors such as banking and healthcare where organizations need to collaborate to share information securely would find this blockchain effective.
Hybrid Blockchains
Hybrid blockchains are similar to consortium blockchains in the sense that both merge features from both private and public blockchains. However, they should not be misconstrued for each other.
These types of blockchains allow users to keep a private network while also prioritizing transparency. They provide a balance between privacy and transparency.
Hybrid blockchains are best suited for applications in sectors, like finance and banking, that require storing sensitive data while still allowing for public verification of certain transactions.
Use Cases for Each Blockchain Type
Let’s now cover how each blockchain type is used in the real world. We’ll begin with public blockchains.
Public blockchains are mostly used in the cryptocurrency industry. Think of Bitcoin, Ethereum, Cardano—the list goes on. Their open nature makes it easy for people to use them to send and receive payment. NFTs, DeFi, and other narratives are also built on these types of blockchains.
Companies that use private blockchains include Walmart and J.P Morgan. For instance, Walmart has been using a private blockchain as early as 2016 to track food across its supply chain.
You’ll find consortium blockchains in government organizations or huge sectors like energy and banking. One example is the R3 blockchain consortium, which Goldman Sachs and nine other enterprise banks launched back in 2014.
For hybrid blockchains, their use cases lie in almost every field. One major example of hybrid blockchains in action is the sports and entertainment industries through Chiliz Chain. It has a limited number of 11 active validators, which is something you’ll find in private blockchains. But it’s still an open network where anyone can build and launch projects, particularly Fan Tokens.
Key Differences and Considerations
Understanding the key differences between the various types of blockchain is critical for determining the best option for specific needs and goals.
Below is a list that highlights the key differences between each blockchain type.
- Accessibility: Public blockchains are open to everyone, allowing for unrestricted participation, whereas private blockchains are only accessible to authorized participants.
- Consensus: Public blockchains frequently employ Proof of Work (PoW) or Proof of Stake (PoS) consensus mechanisms. Private and consortium blockchains, on the other hand, are more likely to use efficient mechanisms such as Practical Byzantine Fault Tolerance (PBFT) or Proof of Authority.
- Performance: Because there are fewer nodes, private and consortium blockchains generally offer faster transactions and greater scalability than public blockchains, which are typically slower due to extensive validation requirements.
- Transparency: Public blockchains are completely transparent, with all transactions visible to anyone, whereas private and consortium blockchains provide more privacy and control over data visibility.
- Governance: Governance in public blockchains is decentralized, often achieved through community consensus. Private blockchains, on the other hand, are controlled by a single organization, whereas consortium blockchains are governed by multiple organizations.
When choosing the right type of blockchain, consider the following factors:
- Accessibility and participation requirements: Determine whether your application requires open access for all users or limited access for authorized participants only.
- Consensus mechanism and transaction speed: Balance the need for quick transaction processing against the importance of decentralized consensus.
- Levels of security and transparency: Consider the trade-off between data security and the need for public transaction visibility.
- Governance and control structure: Consider whether decentralized community governance, centralized control, or shared governance among organizations best meets your requirements.
- Scalability and resource requirements: Evaluate your project’s growth potential as well as the resources available for blockchain network maintenance.
Given these considerations, a hybrid blockchain is often the most versatile option. It strikes a balance between the transparency of public blockchains and the privacy of private blockchains. This makes hybrid blockchains suitable for a wide range of applications across industries.
Chiliz Chain has the largest mainstream sports partner network in blockchain, with a massive potential mainstream audience. We see it as our responsibility to provide educational materials that relate to the entire sector, increasing security, understanding, and adoption of this incredible technology.
