Charles H. Miller
Bitcoin introduced blockchain to the world in 2008, and ever since the technology has caught the media attention, and consequently – business interest from a number of different industries.
Today, propelled by the rise of cryptocurrencies, decentralized computing is emerging as the next big thing in IT. Also today, we have a few different blockchain types, and in this article we’ll briefly go through three main “kinds” — public, private, and consortium or federated blockchains — each of which has its use case(s).
Additionally, there are also some subtypes, such as public-permissioned and private-permissioned blockchains, but we’ll leave them for some other time. So, without further ado, let’s get started…
1. Public Blockchain
As its name says, a public blockchain is fully open to the general public, allowing anyone to read, write and review/audit the (public) ledger.
With no one in charge, you may wonder how decisions are made in the public ledger. For this, public blockchains rely on various decentralized consensus mechanisms, such as Proof of Work (PoW) and Proof of Stake (PoS), which make sure all transactions are cleared on time.
Bitcoin, Litecoin, Ethereum and just about any other cryptocurrency runs on a public blockchain. Because of that, anyone can run a full node and start mining for cryptocurrency. Also, anyone can make transactions and review/audit them in a Blockchain explorer.
2. Private Blockchain
On the other side of the spectrum, we have private blockchains that are privately owned and operated by an individual or an organization, which in turn can set the rules however they like. For instance, they may limit reading from and writing to blockchain to select parties, only.
This is a more centralized system where consensus is achieved on the whims of the central in-charge who can give mining and other rights to anyone or not give at all.
Nonetheless, the system still relies on multiple nodes and uses blockchain-style cryptography to benefit from increased security.
As an example, we could envision banks operating a decentralized system that would allow only certain members to add information to the blockchain.
3. Consortium or Federated Blockchain
This, in-between blockchain type, sits somewhere between a public and private blockchain, putting more than one party in charge.
In other words, in a consortium or federated blockchain we have a group of companies or representative individuals coming together and making decisions for the benefit of the whole network. Such system allows only members of the consortium to make transactions, review/audit blockchain and run a full node.
Making decisions, however, may require a majority of members to vote one way or the other; it is up to the consortium behind such blockchain to come up with its own set of rules and put them into action, typically using a smart contract.
We need all of them
You may like public blockchains, but there are use cases for all three (main) types. Certain industries require confidentiality so they may opt for a private ledger. Also, a group of companies may decide to go with a federated/consortium blockchain.
In order for any technology to advance, we need choice. And if someone needs more control or more privacy, why not provide them with that? And that’s what these non-public blockchains are all about.
