4 Types of Blockchain Explained: A Complete Guide for 2024

A blockchain is an immutable ledger, a way to store and order data and transactions in a way that can’t be easily changed. Each block of transactions or data links to the next to form an unbreakable chain.

When we think of blockchains, we often gravitate to well-known public blockchain networks like Bitcoin and Ethereum. However, there are four different types of blockchains, each with different use cases.

Blockchain’s ability to secure transactions or data makes it well-suited to countless applications in the crypto world and traditional industries.

The availability of several types of blockchains also opens opportunities for both private and public use cases, allowing data privacy or full transparency depending on the type of blockchain technology used.

Table of Contents Table of Contents

1. Key Takeaways
2. 4 Types of Blockchain Available
3. Blockchain Development Platforms
4. The Bottom Line
5. FAQs
6. References

Show Full Guide

Table of Contents

1. Key Takeaways
2. 4 Types of Blockchain Available
3. Blockchain Development Platforms
Show Full Guide
4. The Bottom Line
5. FAQs
6. References

4 Types of Blockchain Available

Fundamentally, there are two key types of blockchains: permissioned and permissionless.

Permissioned blockchains restrict access to specific users, whereas permissionless blockchains offer open access.

However, these permission structures lead to four different types of blockchains: public, private, hybrid, and consortium, each of which brings advantages for specific use cases.

Let’s compare the basic characteristics of each.

Major Types of Blockchains Explained

Potential use cases may overlap for the various types of blockchain platforms, depending on which types of data should be public, shared amongst peers, or private. What entities should control the blockchain also plays a role in determining which type of blockchain should be used.

Public Blockchain

Public blockchains are permissionless and transparent. Users access the blockchain using crypto wallet addresses, allowing pseudonymous identities. Anyone can participate in a public blockchain.

Transaction data is openly available, although some privacy-focused blockchains can obscure specific transaction details, such as transaction amounts.

This makes public blockchain networks permissionless in regard to access and (usually) transaction data held on the ledger.

Advantages

• Decentralization: Most public blockchains are decentralized through the use of distributed copies of the ledger held on individual computers connected to the network called nodes. Similarly, validation of transactions is handled through distributed nodes reaching consensus. In many cases, governance is also decentralized, using voting mechanisms to advance or enact proposals.
• Open Access: Public blockchains provide access through cryptocurrency wallet addresses, which act as an identity on the network. This structure allows anyone to access the blockchain and hosted applications, which are called smart contracts.

Challenges

• Scalability/Speed: The distributed consensus of public blockchain networks can lead to slower transaction speeds.
• Cost: Participants in public blockchains compete for space in each block to finalize transactions. On networks like Bitcoin or Ethereum, this can lead to higher transaction costs. In addition, the price of cryptocurrencies that fuel these blockchains can be volatile, adding to transaction costs when prices spike.

Use Cases

• Payment Rails: Public blockchains offer a permissionless way to send or receive value without traditional intermediaries, such as banks.
• Decentralized Finance (DeFi): Smart contracts in DeFi applications also allow users to participate in lending and borrowing pools or exchange tokens without intermediaries.
• Gaming: Public blockchains also provide support for digital assets like non-fungible tokens (NFTs) that are unique. This functionality pairs well with gaming, for example, in which avatars or other in-game assets can be traded and offer true ownership.

Public Blockchain Example

The Ethereum blockchain is public and supports smart contracts, making it a popular choice for payment applications, DeFi protocols, and gaming. Blockchain explorers like Etherscan allow anyone to view and verify transactions stored on the blockchain.

Private Blockchain

Unlike public blockchains, private blockchains are permissioned, meaning access is restricted to specific users or wallet addresses.

This structure can protect proprietary or private information while also preserving data integrity in a timeline. Private chains are sometimes also called permissioned distributed ledgers.

Advantages

• Controlled Access & Privacy: Restricted access to private blockchains allows organizations to document data and transactions in a timeline while protecting private or proprietary information.
• Optimized Consensus: Centralized consensus allows organizations to choose faster consensus methods using fewer nodes.

Challenges

• Interoperability: Private blockchains often exist as silos, unable to communicate with other blockchains bi-directionally.
• Centralized Control: Private blockchain networks may have a single point of failure. If the organization fails, the blockchain is at risk.
• No Public Access: Data held in private blockchains is not available publicly. Some applications may enable public access to some data while restricting access to other data.

Use Cases

Private blockchain networks are well-suited to financial applications, such as banks and exchanges.

Other uses include identity applications, insurance providers, and digital asset management.

Private Blockchain Example

International high-value insurer Chubb uses blockchain technology to manage multinational policies. The move automated workflow between offices, streamlining processes and improving customer service.

Hybrid Blockchain

A hybrid blockchain network brings open access to some data while protecting sensitive information with permissioned access.

Advantages

• Private & Public Access: Hybrid blockchain networks can be designed to provide limited transparency while protecting sensitive data, such as identities or financial information.
• Interoperability: The public elements of hybrid blockchains can be used on other blockchains. For example, tokenized assets may be used as collateral on another blockchain.
• Scalability: Hybrid chains may not need the same level of decentralization common to public chains, allowing more streamlined consensus and the ability to process more transactions.

Challenges

• Centralized Control: While some aspects of hybrid blockchains provide transparency, the need for privacy may require centralized control of the blockchain, potentially affecting data and assets held on the chain.
• Complexity & Cost: Depending on the structure, building and maintaining a hybrid chain — or two linked chains — can add to development cost and complexity.

Use cases

Hybrid blockchains may provide a better solution for specific applications where limited data sharing is beneficial.

Some examples might include voting, where certain voting data can be recorded on a public blockchain while protecting the identity of voters themselves.

Hybrid Blockchain Example

The LTO Network uses a private layer and a public layer to tokenize real-world assets (RWA). The public layer secures and verifies transactions transparently, whereas the private layer protects user privacy in regard to identity and assets.

Consortium Blockchain

Well-suited to industry groups, consortium blockchains allow data sharing but also offer the ability to protect proprietary data.

A consortium chain parallels the functionality of a hybrid chain, making some elements available openly while protecting other types of data. However, “public” data elements are still restricted to permissioned users within the consortium.

The consortium collectively manages the chain, including which types of data are available to whom as well as how consensus is reached to validate data or transactions.

Advantages

• Shared Data: Consortium blockchains provide a systematic way to track movements or log data points that can benefit the group collectively.
• Shared Cost: Dedicated private blockchains can be costlier to implement as the cost is borne by one organization. Consortiums allow data sharing but also cost sharing.

Challenges

• Complexity: Relative to private networks, consortium blockchain networks can be more complex to build and administer.
• Cooperation: Whether involving organizations or competing businesses, arriving at decisions regarding the blockchain can be more challenging compared to private blockchains.

Use Cases

Consortium blockchains are primarily used for supply chain tracking, but they can also be helpful for any type of linked industry group that could benefit from shared information.

These could include insurers, financial institutions, retail groups, publishing groups, and others.

Consortium Blockchain Example

The IBM Food Trust helps certify the food chain by using blockchain technology.

Growers, suppliers, retailers, and food processors are all linked together, tracing food supply chains from source to store.

Blockchain Development Platforms

Several providers and platforms provide blockchain development services, allowing businesses and organizations to build a customized public, private, hybrid, or consortium blockchain.

These solutions reduce the risk associated with building a chain in-house or sourcing development by using tested models already in use elsewhere in similar applications.

For example, Hyperledger, an open-source blockchain platform, includes global companies like Accenture and Oracle.

The Bottom Line

While we often think of Bitcoin, Ethereum, or even the latest meme coins when thinking about blockchain, the uses of blockchain reach far beyond payments and trading.

The four types of blockchain provide a way to utilize blockchain technology in new applications, some of which may require data protection.

Public networks capture the headlines, but private, hybrid, and consortium blockchains are at work behind the scenes in areas ranging from finance to food supply chains.

FAQs