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Since Bitcoin exploded, the underlying technology that made it possible for a peer-to-peer digital cash system to reach fruition has been gaining popularity. After bitcoin, other blockchain projects have launched, the most popular being Ethereum. Today, organizations, groups and even governments are experimenting with ways to implement a blockchain strategy in their operations. In this article, we’ll be looking at different types of blockchains available today.
A public blockchain is one open to the public. As you may have probably guessed, a public blockchain functions by the principles of democracy: it is owned and run by the people. No individual or group owns or controls the blockchain. I know what you are thinking. If nobody is in charge, how do public blockchains “make” decisions? Short Answer: via a number of consensus mechanisms such as proof of work (as is the case of the Bitcoin and ethereum) and proof of stake. Anyone on the platform can run a full node, implement transactions and review the blockchain. Because they are open source, anyone can participate in the network. The implication of this is that they are also fully decentralized. Because they are not owned or controlled by anyone, public blockchains thrive on an incentive system where participants are rewarded for participating as nodes in the network. Hence, an important part of public blockchains is that they are token-based.
As the name implies, a private blockchain is one owned and controlled by an individual, group or organization. Private blockchains are a direct opposite of a public blockchain, so the characteristics I pointed out earlier are not present in a private blockchain. This means you can’t access a private blockchain without been granted access. In a private blockchain, you can run a full node, implement transactions or audit the blockchain. Private blockchains are also referred to as permissioned blockchains (except you are part of the network, you need to be granted permission to gain access). Why do people set up private blockchains? It’s simple, to get the benefits of a blockchain without exposing sensitive business information. Since there is a centralized party that maintains the blockchain, private blockchains may not be token-based.
Consortium blockchains are like private blockchains except for the fact that they are run by a “consortium” rather than a single entity. Consortium blockchains are only open to members of the consortium. This type of blockchain is like a hybrid of the first two. In essence, it is partly public and partly private. Public in the sense that it is shared by different nodes and private in the sense that there’s a restriction on who can access the network.
Putting It Together
Public blockchains are usually the most appropriate type of blockchain for a crypto project that involves a token. Private blockchains, on the other hand, are mostly for “private needs”. They are most suitable for an organization or group looking to implement a blockchain strategy without exposing sensitive business data. A consortium blockchain is a hybrid of the two and is most suitable for organizations that need to work together but don’t really trust each other.
Abraham Jimoh is a tech enthusiast with an almost maniacal interest in emerging technologies with disruptive potential.