What are the different types of blockchains? A newcomer to crypto might assume we’re talking about the difference between a blockchain that’s dedicated to Bitcoin or Ethereum, but instead, we’re discussing the different types of blockchains defined by access and access-related issues.
Those definitions can include:
- Public blockchain networks
- Private blockchains
- Consortium blockchains
- “Permissioned” blockchains
- Hybrid blockchains
We’ll examine these below. The thing to remember about blockchain technology for the newcomer? Blockchains are what you could call distributed public ledgers that contain the record of transactions among other things–the blockchain is NOT the cryptocurrency, it facilitates the mining, minting, buying, selling, and trading of crypto.
As the name implies, the public blockchain is something that anyone can use to mine, buy, sell, trade, etc.
But to mine coins on a public blockchain, you’ll need to use more computing power than for “normal operations” and specific equipment on top of that. To buy, sell, and trade on public networks you do not need a third party–just you and your seller, trader, or buyer.
But you can use third-party platforms associated with the network for your transactions, too. Anyone can use the public option.
If you have access to a private blockchain network, you have basically been granted access to what is basically a peer-to-peer network that has no centralized hub. In spite of this decentralization, a single entity is likely to control the private blockchain you use or want to use.
This entity is responsible for establishing “consensus protocols” that help keep operations on the blockchain basically honest. Validation, proof of work, proof of stake, and other measures may all be part of this.
This is a shared blockchain “ledger” or record of all transactions, but the private nature of these blockchains may offer a higher level of security (or not) depending on the authority running them.
How trustworthy is any private blockchain or the third parties that manage them? That will depend strictly on the personal or corporate integrity of the third parties.
Remember that there are no centralized governing bodies regulating this type of speculative investment opportunity, so you will need to carefully research the players and users of a given private blockchain yourself. While some may choose to learn the hard way, it’s not recommended when investing money into crypto at any level.
In the same way that a single entity might administer a blockchain as a public or private operation, there are also consortiums that bring multiple companies or individuals together to administer a blockchain network or to share responsibility for it.
The number of companies or people, the types of operations, and the amount of permission needed for certain operations may be arrived at by consensus rather than the dictates of an individual buyer, seller, trader, or commercial entity.
A Word About Permissioned Blockchain Networks
A “permissioned” blockchain network can be set up for both private and public blockchain operations.
That means that, in the context of the public version, there may be an open invite to the public but there are restrictions on who can actually use the network and how. In other words, you may be dealing with a tiered permission structure that is not all things for all users.
In the age of hackers, scams, and other online problems, the permissioned network could be viewed as a necessary inconvenience for some, and a sense-of-security-adding feature for others.
Permissioned blockchain operations may be run on an invitation-only basis, they may be run on an application basis (you have to apply or request permission to be added), etc.
Are Blockchains Secure?
Blockchain technology functions in a decentralized way, but the way it works is to put data into blocks with each block connected to the one before it. The arrangement of these blocks, according to IBM, makes it so that it is quite difficult or impossible to alter.
Adding to the security of these functions, the consensus measures required of all users on the network also help add further security. A single user could not substantially alter the record, as the design is understood by today’s users.
That does not rule out future innovations that might threaten that security, but at press time IBM and other companies like it identify other risks as being more relevant today.
What are those risks? Basically those associated with hacking and data theft–you are more likely to have your private keys stolen by a hacker than to experience a hacking attempt that tries to compromise the blockchain process of validation, consensus, etc. itself.
IBM identifies user computer compromise, stolen private crypto keys, and “code exploitation” as the primary threats to those using today’s blockchains, whether public or private.
Joe Wallace has covered real estate and financial topics, including crypto and NFTs since 1995. His work has appeared on Veteran.com, The Pentagon Channel, ABC and many print and online publications. Joe is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News.