There are three main types of Blockchain that have emerged after Bitcoin introduced Blockchain to the world.
- Public Blockchain
- Private Blockchain
- Consortium or Federated Blockchain
There are also some more complicated types also such as public-permissioned Blockchain, private-permissioned Blockchain but for now we will keep it simple.
Now let’s see what is the deal about these three.
A public blockchain as its name suggests is public, meaning that it is- ‘for the people, by the people and of the people’
Nobody owns it and nobody is in charge. Anyone can participate in reading/writing/auditing the Blockchain. Another thing is that this type of Blockchain is open and transparent; hence, anyone can review anything anytime on a public blockchain.
But if nobody is in charge of Blockchain how the decisions are made? The answer is that decision making happens by various decentralized consensus mechanisms such as Proof of Work (POW) and Proof of Stake(POS). We wrote about it earlier.
Private Blockchain is a private property of an individual or an organization.
Unlike public Blockchain, here exists the person in charge, which decides who can read/write on the Blockchain. The consensus depends on the person in charge, which can give mining rights to anyone or deny all other participants and make decisions all by himself.
This makes it centralized, but it is cryptographically secured and more cost-effective, which are two reasons why companies decide to use private blockchains instead of centralized databases.
Consortium or Federated Blockchain
This type of Blockchain tries to remove the sole rule which is given to one entity on private blockchains.
So instead of having one person in charge, you need to have more persons to make a decision. Basically, a group of companies or individuals comes together and makes decisions for the best of the whole network. Such groups are called consortiums or federations, which explains the name.
This is a great way to achieve things faster among different entities (companies) and protect the system against having a single point of failure.
Why We Need Them
We require different types of Blockchain because they solve different types of problems. Some of the advantages of different types of Blockchains:
- They are cost effective and fast.
- No need to rely upon massive servers.
- No more intermediaries, we can simply implement smart contracts.
- Gives options to manage rights and access while leveraging the same blockchain technology and reaping its benefits.
- Reduces redundant work.
- Distributed consensus between interested parties becomes fast, without any geographical or any other concerns.
In any case, all blockchain types have good use cases which solve real problems. That’s a great start for further development of the technology.